Executive Summary

Q1 2025 delivered mixed results: adjusted EPS of $2.06, slightly above Street, but revenue and adjusted EBITDA missed; gross margin expanded 80 bps to 19.3% on lower on‑prem software mix .
Hardware revenue rose 1% YoY (first growth in 10 quarters), while cloud gross profit fell 3% and Insight Core Services gross profit declined 4% amid delayed enterprise projects and partner program changes .
Management reiterated FY2025 guidance (adjusted EPS $9.70–$10.10; gross margin ~20%; low single‑digit gross profit growth), with profitability weighted to H2 as cloud partner program headwinds ease; SG&A discipline remains a key lever .
Capital allocation/catalyst: warrants settlement lowers average share count to 32.9M for FY25 , and the company repurchased ~~600K shares (~~$76M) from ValueAct post‑quarter, supporting EPS and signaling confidence .
Macro/tariffs: minimal tariff‑related demand pull‑ins so far; pricing actions subdued; AI infrastructure and device refresh (Windows 11) underpin hardware momentum while services softness likely improves as hardware attach lags normalize .

What Went Well and What Went Wrong

What Went Well

Hardware momentum resumed (servers/storage strength, devices recovery), driving the first YoY hardware revenue increase in 10 quarters and aiding margin mix shift .
Gross margin expanded 80 bps to 19.3% as lower on‑prem software mix offset partner program headwinds; adjusted EFO of $102.4M landed in line with internal expectations .
Management reiterated FY25 guide despite a tougher macro backdrop, citing disciplined SG&A, improving hardware demand and confidence in H2 profitability .
Quote: “We delivered adjusted earnings from operations and adjusted diluted earnings per share in line with our expectations… effective expense management allowed us to achieve our profitability target.” — Joyce Mullen, CEO .

What Went Wrong

Cloud gross profit fell 3% and Insight Core Services gross profit fell 4% YoY; management cited legacy Microsoft enterprise agreement declines and delayed product‑related services attach with large enterprises .
GAAP earnings hit by non‑operating items: $25.1M loss from warrant revaluation and $15.2M earnout revaluation drove diluted GAAP EPS down 87% YoY to $0.22 .
Services demand remained soft amid macro uncertainty; management expects improvement as hardware attach catches up later in the year .

Financial Results

Metric	Q3 2024	Q4 2024	Q1 2025
Revenue ($USD Billions)	$2.09	$2.07	$2.10
Gross Profit ($USD Millions)	$432.1	$439.6	$406.5
Gross Margin %	20.7%	21.2%	19.3%
GAAP EFO ($USD Millions)	$92.9	$64.7	$60.1
GAAP EFO Margin %	4.4%	3.1%	2.9%
Adjusted EFO ($USD Millions)	$120.1	$129.4	$102.4
Adjusted EFO Margin %	5.8%	6.2%	4.9%
Diluted EPS (GAAP) ($)	$1.52	$0.99	$0.22
Adjusted Diluted EPS ($)	$2.19	$2.66	$2.06
Adjusted EBITDA ($USD Millions)	$128.8	$141.1	$111.3

Segment breakdown (Q1 2025):

Segment	Net Sales ($USD Millions)	YoY %	Gross Profit ($USD Millions)	Gross Margin %	GAAP EFO ($USD Millions)	Adjusted EFO ($USD Millions)
North America	$1,700.6	(11%)	$319.5	18.8%	$50.8	$87.0
EMEA	$342.8	(17%)	$71.9	21.0%	$5.0	$11.0
APAC	$60.1	(3%)	$15.1	25.1%	$4.3	$4.4

KPIs:

KPI	Q3 2024	Q4 2024	Q1 2025
Cloud Gross Profit ($USD Millions)	$129	$125	$103
Insight Core Services Gross Profit ($USD Millions)	$81	$78	$73

Notes:

GAAP net earnings: $7.5M (0.4% of net sales) .
Operating cash flow: $78.1M .
Total debt at 3/31/25: ~$961M; debt up ~$80M YoY, while $574M spent on acquisitions, buybacks, and warrant settlements .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Adjusted Diluted EPS	FY 2025	$9.70–$10.10	$9.70–$10.10	Maintained
Gross Profit Growth	FY 2025	Low single‑digits	Low single‑digits	Maintained
Gross Margin	FY 2025	~20%	~20%	Maintained
Interest Expense	FY 2025	$70–$75M	$70–$75M	Maintained
Effective Tax Rate	FY 2025	25%–26%	25%–26%	Maintained
Capital Expenditures	FY 2025	$35–$40M	$35–$40M	Maintained
Average Share Count	FY 2025	32.9M	32.9M	Maintained

Earnings Call Themes & Trends

Topic	Previous Mentions (Q3 2024)	Previous Mentions (Q4 2024)	Current Period (Q1 2025)	Trend
AI/technology initiatives	Strong cloud GP +33% YoY; building capabilities across cloud/data/AI; cautious macro	Record gross margin; cloud GP +21% FY; continued AI/multi‑cloud investments	AI focus; Vertex/Gemini case studies; elite Databricks status; clients reallocating budgets to AI	Steady build; more client examples and partner accolades
Tariffs/supply chain	Not a focus in Q3 release	Not contemplated in Feb guidance	Minimal tariff pull‑ins; subdued OEM pricing; >10% tariffs slightly positive; higher tariffs would mute demand	Watching; currently manageable
Product performance (hardware)	North America product down 11%; services up 10%	Hardware down 10% YoY; devices strength; margin up	Hardware +1% YoY; servers/storage solid; devices recovery	Improving sequentially
Cloud partner program changes	Cloud GP +33% YoY; strong EMEA/APAC growth	Cloud GP +3% YoY in Q4; FY +21%; definition recast	Headwind in H1; pivot to corporate/mid‑market; underlying SaaS/IaaS GP +17% ex‑program changes	Near‑term headwind; H2 improvement expected
Services demand	Services GP +13% YoY; ICS +14%	ICS GP +12% YoY in Q4	ICS GP down 4% on delayed product‑related services; attach lag noted	Soft in H1; expected to improve with hardware attach

Management Commentary

Strategic focus: “We remain focused on our strategy to drive long‑term profitable growth… AI will be a huge driver of business process transformation for our clients.” — Joyce Mullen, CEO .
Cloud/programs: “Cloud performance… underlying SaaS and IaaS gross profit grew 17%, offset by partner program changes… we anticipate the headwind to be weighted more in the first half.” — James Morgado, CFO .
Macro/tariffs: “We saw some minimal pull‑ins in response to the threat of tariffs… if tariff rates stay ~10%, impact is slightly positive as ASPs go up; at higher rates, demand gets muted.” — Joyce Mullen .
Cost discipline: “We will continue to prudently manage SG&A… adjusted SG&A declined 5% driven by actions we took in Q4.” — James Morgado .

Q&A Highlights

Tariffs/pricing elasticity: OEM responses vary; quotes shortened; subdued for now; 10% tariffs modest tailwind via ASPs; higher tariffs a risk to demand and budget certainty .
Hardware demand breadth: Momentum extends beyond PCs to infrastructure; minimal tariff‑related pull‑ins; AI infrastructure readiness (data, devices) cited as demand driver .
Services softness/attach lag: Product‑related services declined; attach lags improving as hardware bookings rise; consulting retooled for rapid scoping and digestible projects; continued focus on data/AI, multi‑cloud, cyber, edge M&A .
SG&A and headcount: SG&A to grow slower than GP; preserve sales/technical capacity; watch carefully through year .
Liquidity/capital structure: $961M debt; $1.8B ABL capacity ($1.3B available); warrants and convert settled; trailing ROIC 14.9% . Post‑quarter, repurchased ~~600K shares (~~$76M) from ValueAct, reinforcing capital returns .

Estimates Context

Metric	Consensus (Q1 2025)	Actual (Q1 2025)	Surprise
Primary EPS (Adjusted)	$2.009*	$2.06	+$0.051 (beat)
Revenue ($USD Billions)	$2.19*	$2.10	-$0.09B (miss)
EBITDA ($USD Millions)	$125.0*	$111.3	-$13.7M (miss)

Values retrieved from S&P Global.*
Implications: A modest adjusted EPS beat amid revenue and adjusted EBITDA misses reflects stronger mix/margins and lower adjusted SG&A, but top‑line pressure from on‑prem software and cloud program changes likely drives estimate revisions toward lower revenue/EBITDA in H1, with H2 recovery embedded in full‑year guidance .

Key Takeaways for Investors

Mix‑driven margin expansion offset weaker revenue/EBITDA: Lower on‑prem software and disciplined SG&A supported adjusted EPS beat despite revenue/EBITDA misses; monitor sustainability as cloud program headwinds fade in H2 .
Hardware upturn is credible: Servers/storage strength and device recovery, plus Windows 11 refresh and AI infrastructure needs, underpin sequential improvement; services attach should lag but improve into H2 .
Guidance intact; H2 weighted: Reiterated adjusted EPS $9.70–$10.10 and gross margin ~20%; visibility improves as partner program changes annualize and services attach normalizes .
Capital allocation supportive: Average share count guided to 32.9M (warrant settlements), plus post‑quarter repurchase from ValueAct (~$76M) provides EPS tailwind and confidence signal .
Risks: Elevated tariffs (>10%) could dampen demand and increase budget uncertainty; services softness at large enterprises persists in H1; cloud program changes weigh near‑term .
Trade setup: Near‑term choppiness likely as Street resets revenue/EBITDA for H1; constructive into H2 if hardware momentum holds and services attach improves, with buybacks/share count reduction a potential EPS support .
Medium‑term thesis: Execution on AI/data/multi‑cloud solutions and deepening partner integration should shift mix to higher‑margin services over time; watch for M&A that augments domain/process capabilities .

Appendix: Additional Data Points

Q1 2025 cloud GP: $103M (-3% YoY); Insight Core Services GP: $73M (-4% YoY) .
Non‑GAAP adjustments: $25.069M warrant revaluation loss and $15.2M earnout revaluation lowered GAAP EPS; adjusted EPS excludes these items per policy .
Segment margin expansion: EMEA and APAC gross margin up 280 bps and down 90 bps respectively; North America gross margin up 40 bps .

INSIGHT ENTERPRISES INC (NSIT)·Q1 2025 Earnings Summary