Insight Enterprises, Inc. Q1 FY2026 earnings call

• Q1 results exceeded expectations with net revenue growth driven by hardware and services.
• Adjusted SG&A increased 9%, adjusted EBITDA up 27%.
• Pausing M&A for the balance of the year and shifting focus to share repurchases.
• Adjusted diluted earnings per share guidance between $11 - $11.50, gross profit growth low single digits, cash flow from operations $300 - $400 million.
• Acknowledging teammates' work this quarter, emphasizing focus, execution, and strategy across the company.

Net revenue was $2.1 billion, an increase of 1% in U.S. dollar terms and a decrease of 1% in constant currency. Hardware revenue increased 7% with growth in both devices and infrastructure. Core services revenue was up 11%. Cloud gross profit was $139 million, an increase of 35%. Insight Core Services gross profit was $86 million, an increase of 19%. Hardware gross profit was up 3%, while gross margin declined 50 basis points due to client mix. Total gross margin was 21.7%, an increase of 2.4 points. Adjusted EBITDA was $152 million, up 27%, while margin expanded 1.4 points to 7.1%. Adjusted diluted earnings per share were $2.88, up 26% in U.S. dollar terms and 25% in constant currency. For the quarter, $32 million of cash flow from operations was generated. For the year, cash flow from operations is anticipated in the range of $300 to $400 million. In Q1, $75 million in shares were repurchased and $224 million in remaining authorization. Total debt was approximately $1.5 billion compared to $961 million a year ago. Adjusted return on invested capital for the trailing 12 months at the end of Q1 was 16.7% compared to 16% a year ago.

For the full year of 2026, guidance includes gross profit growth in the low single digits and gross margin approximately 21.5%. Excluding stock-based compensation, adjusted diluted earnings per share will be between $11 and $11.50 with a bias towards the high end of the range, representing approximately 5% growth at the midpoint compared to 2025. Cash flow from operations is expected in the $300 to $400 million range. Interest and other expenses are approximately $90 million, effective tax rate 25.5% to 26.5%, capital expenditures $20 to $30 million, and average share count for the full year approximately 30 million shares.

• Ongoing complexity of the environment including geopolitical risk and supply chain challenges.
• Memory cost issues and supply issues impacting hardware demand.
• Partner program changes and macroeconomic outlook affecting cloud growth.

Q: Good morning and congrats, Jack, on joining the company. Looking forward to working with you. I thought your background was particularly interesting with Accenture and services, and I wonder if you might just spend a little bit of time You know, talking about the opportunity that you see at Insight and what you may bring from your experience at Accenture, particularly around the services portion of the business. And also, do you think, you know, there's opportunity there more organic or inorganic? I know, obviously, acquisitions are paused for this year, and that makes a lot of sense. But maybe just kind of describe how you see that services business evolving.

A: Adam, thank you and thank you for the partnership and the relationship. So yes, I started my career in the software industry and then over 29 years at Accenture with a variety of roles, including leading our global consulting business, our industry programs and functional programs over the last three and a half years. Obviously, when we look at the portfolio at Insight, This is not an either-or strategy. Hardware, software, and solutions are critical to our growth, and we'll be focusing both on the resale business and the services business. We have tremendous capability in services. We've done some tremendous acquisitions, have been very positively embraced by the capabilities, and for the remainder of the year, my focus is on the organic growth of our business. I will be spending a lot of time with our services business, making sure we have the right offerings. We invest in areas like cloud, data, AI, security, as well as some of the hybrid scale capabilities, including merging that together, linking our services and our hardware capabilities and engineering capabilities. This year, my focus is on the organic business, getting additional organic growth. And, you know, we have a lot to build upon here, some great capabilities, and we need to invest in them, and I will be focused on getting organic growth through the remainder of the year.

Q: Hey, good morning. Thanks for the questions. Maybe for my first, if I could, Jack, nice to hear from you and appreciate all your early remarks here. But given where you're coming from, you know, I'm just curious if you could share a bit more specifically with fresh eyes on the business, you know, where do you see the one or two biggest low-hanging opportunities at Insight that you think are underappreciated and can really go after relative to the priorities that you outlined in your prepared remarks and then i have a follow-up A: Let me touch on three things the first one is organic growth uh we have tremendous opportunity we're going to continue to invest in the capabilities we've purchased and i mentioned the aries cloud data ai security hybrid cloud We're going to continue to use AI to support our sales execution. There's tremendous opportunity there, and continue to invest in enabling our sales, pre-sales, and engineering capabilities to be even more impactful in front of our clients. So that's priority number one. We've got opportunities on organic growth. I'm still not pleased with where we are in our organic growth in the services business, but we've got great capabilities. We've got to leverage them in the right way, and that'll be a key focus The second area is operating leverage, and we're going to continue to focus on that, be it the use of AI and technology internally. We've done a lot of progress there, but there's more work to do, as you can imagine, deploying AI to automate and and drive much more flawless execution throughout the entire enterprise. We're going to continue to leverage our global delivery centers that we've built in multiple locations. We're going to continue to look at our operating model. I've talked to our teammates about OneInsight and leveraging our global scale more efficiently. So that's part number two, operating leverage. And three is obviously capital allocation, and I've talked about that. We think investing in our stock right now So that's going to be our focus for the year. So those are the three areas, Joe.

Q: Hey, good morning. Thanks for the questions. Maybe for my first, if I could, James, nice to hear from you and appreciate all your early remarks here. But given where you're coming from, you know, I'm just curious if you could share a bit more specifically with fresh eyes on the business, you know, where do you see the one or two biggest low-hanging opportunities at Insight that you think are underappreciated and can really go after relative to the priorities that you outlined in your prepared remarks and then i have a follow-up A: Yeah. Thanks, Adam. You know, we're maintaining a similar approach to what we had last quarter, which is we continue to take a prudent stance on our outlook for the year. Q1, as we mentioned, exceeded our expectations. It was a strong start to the year. So we're pleased with that. In the cloud space in particular, real strength in the quarter. The comparison are a little easier in Q1. They do get more challenging as the year progresses, kind of across the board, but you'll see it in the cloud space in particular. But we did really, really well in cloud, and I like the momentum that I'm seeing there, at least as it moves into Q2. Hardware, you know, it was largely on our expectations in the quarter. We exited the quarter with strong backlog. It's actually More than elevated, I would say it is similar to the levels that we had exiting COVID. So it's the most elevated that it has been in multiple years. So we're carrying that into Q2. Bookings were strong in Q1. The bookings have started with similar patterns in Q2. The challenge that we have there is really determining when that backlog will flush through and when we'll realize it from a revenue standpoint. Memory prices have not settled. You know, there's still a lot of noise with memory and cost increases and then extended lead times as well. So that creates a lot of just complexity when it comes to the hardware space. And then on core services, you know, good, obviously very strong GP growth. Some of that is driven by gross margin. But the underlying revenue was 11%. That is also strong. There's strong contribution from the new acquisitions. We're still focused on the organic business, and as Jack and I have looked at that, we're prepared to do that. But that's what's gone into the guidance and the outlook. You know, I would expect Q2 to moderate from the Q1 levels, just for nothing else, just based on the comparison to last year. But we're pleased with the start of the year. We're really focused on Q2, Adam. We want to deliver a strong Q2 and have a good setup for the second half. But we're going to maintain that prudent approach as of now, and we'll come back to you at the end of Q2 and give an update on what we see for the rest of the year Q: Hey, good morning. Thanks for the questions. Maybe for my first, if I could, Joseph Cardoso, nice to hear from you and appreciate all your early remarks here. But given where you're coming from, you know, I'm just curious if you could share a bit more specifically with fresh eyes on the business, you know, where do you see the one or two biggest low-hanging opportunities at Insight that you think are underappreciated and can really go after relative to the priorities that you outlined in your prepared remarks and then i have a follow-up A: Yeah, it's a great, great, great question, Joe. And, you know, seasonality for us, particularly in the cloud space, has changed a bit, especially since the SADA acquisition. If you rewind prior to the SADA acquisition, it very much followed Microsoft with a very strong Q2. That is historically what we've seen. Post the SADA acquisition, it balanced more out between Q2 and Q4. Um, and then last year with the partner program changes really created noise in, in the seasonality with those partner program changes being more heavily weighted towards the first half of the year. So the, there, there is, if you look over the last couple of years, there really is no, really not a pronounced seasonality per se. Um, but I would still expect just generally, if you, if you wipe out the compares. On a normalized basis, Q2 and Q4 would typically be our stronger quarters, just from a total volume standpoint. In Q1, in particular, what we saw is real strength in Microsoft and CSP in particular. And that's representative, I think, of the strong pivot that we have made in the Microsoft business. I would say Google, and I called this out, I would say in our Google practice, There's still work to do. We are still building, you know, that corporate and mid-market base in cloud. And so there's a little bit with SADA, there will be a little bit of a, if you will, still an impact in the second half, in particular in Q4 as we continue to build the base because of the seasonality associated with Google now with that business in Q4. And so good start to the quarter, to the year, I would say, Joe. I think we're carrying momentum into Q2, but there is still some noise in the second half, even as it pertains to cloud.