IT solutions integrator Insight Enterprises (NASDAQ: NSIT) missed Wall Street’s revenue expectations in Q2 CY2025, with sales falling 3.2% year on year to $2.09 billion. Its non-GAAP profit of $2.45 per share was 0.7% below analysts’ consensus estimates.

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StockStory’s Take

Insight Enterprises saw a significant negative market reaction to its Q2 results, as both revenue and non-GAAP earnings per share missed Wall Street expectations. Management attributed the underperformance to ongoing disruptions from partner program changes, particularly in the cloud and software business lines, as well as delays in large enterprise services projects. CEO Joyce Mullen cited a “challenging environment, primarily driven by partner program changes,” and noted that while hardware sales showed growth, overall profitability was pressured by these structural headwinds.

Looking forward, Insight Enterprises' outlook is shaped by its commitment to becoming an “AI-first solutions integrator” and its focus on leveraging artificial intelligence across internal operations and client offerings. Management reiterated full-year guidance, emphasizing expectations for hardware demand to build during the second half and for cloud and services businesses to stabilize as partner program impacts normalize. CFO James Morgado noted, “We expect hardware gross profit to grow in the mid-single digits,” while also highlighting ongoing efforts to drive operating expense leverage and productivity improvements through AI adoption.

Key Insights from Management’s Remarks

Management pointed to partner program disruptions, delayed client projects, and the integration of AI as major themes impacting Q2 performance and shaping guidance for the rest of the year.

• Partner program changes: The company continued to face significant headwinds from recent changes in partner incentive structures, particularly with large vendors like Microsoft and Google. These changes shifted gross product revenue to net agency services, leading to a decline in reported cloud and on-prem software revenue and profit. Management stated these impacts were most acute in the first half and expect normalization by year-end.

• Hardware and commercial growth: Hardware revenue, especially in North America, grew for a second consecutive quarter, driven by device refresh cycles and infrastructure demand. The commercial client segment achieved its fifth straight quarter of growth, and management expects hardware demand to build as corporate and enterprise bookings improve.

• Delays in services projects: Large enterprise clients delayed the initiation of new services and infrastructure projects, citing ongoing macroeconomic uncertainty and the need to preserve resources for future AI investments. Management noted an uptick in small-scale AI assessment projects but acknowledged that larger engagements remain muted.

• Internal productivity focus: The company aggressively adopted AI internally to streamline operations and contain SG&A expenses. CEO Joyce Mullen highlighted notable productivity improvements in software development and back-office processes, which allowed headcount to remain flat even as some business lines expanded.

• M&A and skill development: Acquisitions remain key to building capabilities in AI, data, cloud, and security. In tandem, Insight is investing in upskilling existing staff with AI certifications and training, aiming to position itself as a trusted adviser for clients navigating generative AI adoption.

Drivers of Future Performance

Looking ahead, Insight Enterprises expects hardware demand, partner program normalization, and AI-driven productivity improvements to shape results amid ongoing macroeconomic uncertainty.

• Hardware and device refresh cycles: Management expects hardware demand to steadily increase through the remainder of the year, driven by the aging installed base and the Windows 10 end-of-life transition. This trend is anticipated to benefit both corporate and large enterprise clients as they refresh devices and update infrastructure.

• Partner program normalization: The negative impact from recent partner program changes is expected to lessen in the second half, with cloud and software businesses stabilizing as the company adapts to new incentive structures. Management believes this will support an eventual return to growth in these segments by year-end.

• AI-driven operational leverage: By aggressively embedding AI in internal processes and client solutions, Insight aims to achieve sustained SG&A cost discipline and improved profitability. These initiatives are designed to enable growth without significant headcount increases and to support margin resilience even as the business mix evolves.

Catalysts in Upcoming Quarters

Our analyst team will be closely monitoring (1) whether hardware demand continues to accelerate in line with device refresh cycles and Windows 10 end-of-life, (2) signs that partner program headwinds in cloud and software are normalizing as expected, and (3) the pace and scale of AI adoption in both internal operations and client-facing solutions. Progress on integrating recent acquisitions and expanding the services portfolio will also be important signposts for execution.

Insight Enterprises currently trades at $128.52, down from $144.77 just before the earnings. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free).

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