Ingram Micro (INGM): A Record Quarter With Negative Free Cash Flow — Why the Beat Cost It 7%

Ingram Micro Holding Corporation (INGM) Q2 2026 — Net sales $14,531.1M (+13.6%), above the high end of guidance. Non-GAAP diluted EPS $0.82 vs $0.61 (+34.4%) vs ~$0.74 est. Adjusted EBITDA $355.8M (+21.0%). Adjusted ROIC 8.4% to 10.8%. Dividend raised to $0.086. And adjusted free cash flow was NEGATIVE $527.3M. The stock closed at $28.21, DOWN 7.2%. Ingram Micro beat on every line it guides to — net sales, gross profit, operating income and EPS all above the high end — and fell 7.2%. The reason is one number nobody quoted: cash used in operating activities was $533.2M in the quarter and $1,511.1M in the half. Roll it to twelve months off the company's own statements and trailing free cash flow is NEGATIVE $231.6M. The earnings are real. The cash is sitting in a $1.05B inventory build. THE CALL: HOLD (3/5, RECORD EARNINGS, RENTED CASH FLOW) — base-case value ~$27.5 vs ~$28.21 today. KEY METRICS: - Net sales $14,531.1M (+13.6%, ~12.6% ex-FX), above the high end of guidance, all four regions growing. Gross profit $958.7M (+14.2%) but gross margin only 6.60% vs 6.56% — +4bps, of which 5bps was currency. Adjusted EBITDA $355.8M (+21.0%); adjusted income from operations $280.4M (+39.6%) - The entire operating gain is SG&A leverage: 5.44% of sales to 4.92%, ~52bps worth ~$76M, against a $79.6M rise in adjusted operating income. Non-GAAP diluted EPS $0.82 vs $0.61; GAAP EPS $0.48 vs $0.16 (prior year carried $43.2M of held-for-sale write-downs) - Cash used in operations $533.2M; adjusted FCF -$527.3M in the quarter and -$1,489.7M in the half. TTM free cash flow, derived from the filings, is -$231.6M. Inventory $4,970.1M to $6,020.1M (+21.1%); cash $1,864.7M to $809.0M; short-term debt $449.6M to $1,236.8M on a $812.8M net revolver draw - Regional gross margins: Latin America 10.32%, EMEA 7.63%, North America 6.88%, Asia-Pacific 4.47%. Asia-Pacific grew sales 27.1% (Advanced Solutions +51% on GPU and AI-infrastructure) and went from 27.2% to 30.4% of the company — the AI revenue is landing in the thinnest-margin region and diluting the blend - Q3 2026 guide: net sales $13,550-13,950M (+7.5% to +10.7%, but -5.4% sequentially at the midpoint), gross profit $910-955M (~6.78% margin, guided UP), non-GAAP diluted EPS $0.72-0.82 — the high end merely matches Q2. Net debt $2,986.5M; adjusted ROIC 10.8% vs 8.4% What to watch: Bullish: H2 free cash flow converting — a full-year FCF-positive 2026 despite the first-half burn, with gross margin holding the guided ~6.78%. Bearish: a third straight negative-FCF quarter, consolidated gross margin back below 6.5% as Asia-Pacific mix grows, or another large Platinum sell-down. Size buyer nearer ~$22. Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.