ScanSource, Inc. reported second‑quarter 2026 results that fell short of analyst expectations. Net sales reached $766.5 million, a 2.5% year‑over‑year increase, but the figure missed the consensus estimate of $782–$795 million. Gross profit climbed to $102.9 million, up 1.2% from the prior year quarter, while the gross‑profit margin slipped to 13.4% from 13.6% in Q2 FY25. Operating income declined to $17.9 million, a 3.1% drop from $18.4 million, and GAAP net income fell to $16.5 million, or $0.75 per diluted share, versus $17.1 million and $0.70 in the same quarter a year earlier. Non‑GAAP adjusted EBITDA was $31.2 million, or 4.07% of net sales, down 11.6% from $35.3 million in Q2 FY25.
The revenue miss was driven by weaker demand in the packaging and industrial products segment, which accounted for a larger share of the quarter’s sales than in the prior year. Specialty Technology Solutions, the company’s higher‑margin business, grew modestly, but the Intelisys & Advisory segment, which has lower margins, contracted, pulling the overall mix toward lower profitability. Analysts had expected a 2.5–3% revenue rise, but the combination of a softer industrial market and a shift toward lower‑margin services caused the shortfall.
Margin compression was largely a result of higher selling, general, and administrative expenses that rose faster than revenue. The company also faced cost inflation in raw materials and logistics, which eroded the gross‑profit margin. The mix shift toward the Intelisys & Advisory segment, which carries a lower gross‑margin profile, further contributed to the 0.2‑percentage‑point decline in gross‑profit margin and the 0.65‑percentage‑point drop in adjusted EBITDA margin to 4.07% from 4.72% a year earlier.
Despite the headline misses, ScanSource’s recurring‑revenue segment grew 15.9% year‑over‑year, now representing 37.2% of gross profit compared with 32.5% in Q2 FY25. The company attributes this growth to increased demand for its subscription‑based services and long‑term contracts, which provide more predictable cash flows and higher margins. Management highlighted that the recurring‑revenue expansion is a key pillar of its long‑term strategy to shift away from one‑off sales.
The company revised its full‑year 2026 outlook, lowering net‑sales guidance to $3.0 billion–$3.1 billion from the previous $3.1 billion–$3.3 billion range, and adjusted EBITDA guidance to $140 million–$150 million from $150 million–$160 million. The free‑cash‑flow target of at least $80 million was maintained. CEO Mike Baur said the guidance cut reflects a more challenging operating environment, but the company remains confident in its ability to generate strong free cash flow through disciplined cost management and continued investment in high‑margin recurring services.
Investors reacted to the earnings miss and the downward revision of guidance, signaling concern about the company’s near‑term performance. Management reiterated its commitment to the three‑year strategic plan and emphasized that the guidance adjustment is a prudent response to the current market headwinds, while the recurring‑revenue growth and free‑cash‑flow target provide a foundation for future resilience.
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