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TD Synnex (SNX -8%) is under pressure today after reporting a Q2 (May) EPS miss, following three quarters of double-digit EPS beats. In fairness, EPS came in around the mid-point of prior guidance of $2.50-3.00, but analysts were looking for more. Revenue fell 0.8% yr/yr to $13.95 bln, which also was below analyst expectations. Q2 marked SNX's sixth consecutive quarter of yr/yr revenue declines. Guidance for Q3 (Aug) was a bit better with in-line EPS and revs.

• SNX is a name we like to keep an eye on to gauge enterprise spending levels for network equipment and PCs. Also, SNX reports early in the earnings reporting cycle, so it gives us a sense of what to expect when earnings season rolls in. TD Synnex does not manufacture anything. It's more of a distributor of third party IT products, from software to servers and storage systems. When a business wants to spend on IT, SNX acts as the point person, putting everything together.
• Despite the earnings miss today, SNX says its markets have continued to stabilize. Results in Q2 were aided by an improving IT spending environment with gross billings growth in Endpoint Solutions, Advanced Solutions and Strategic Technologies.
• Looking ahead, SNX believes it's well-positioned to benefit from accelerated growth in Q3-Q4 as the IT spending market is rebounding. That was evident with non-GAAP gross billings returning to positive growth following a prolonged period with challenging market conditions. In Q2, this metric grew 3% yr/yr to $19.3 bln, which was on the higher end of its $18.4-19.6 bln prior guidance. And its Q3 guidance for this metric was healthy at $18.9-20.1 bln.
• Importantly, SNX believes AI is a meaningful opportunity for the company over the foreseeable future. SNX believes AI will be the next great transformative era for the technology sector. SNX says a portion of that spend will come through business partner ecosystem and SNX should see benefits across components, devices, data center, cloud storage, networking, as well as the related software applications and services.

Overall, investors are a bit disappointed in SNX's Q2 results. After three double-digit EPS beats, a miss on EPS was a letdown. Also, investors want to see SNX return to yr/yr revenue growth but we got another decrease this quarter. The silver lining is that SNX's gross billings did finally turn positive yr/yr. Also, its billings numbers do seem to support SNX's view that IT spending is recovering. We think that bodes well for tech names as we begin earnings season in a few weeks. Looking ahead, we should note that new CEO Patrick Zammit is taking the helm on September 1. He succeeds Rich Hume, who will retire. Zammit is currently COO and is being promoted. We look forward to his viewpoints on the next earnings call.