Feb 5 (Reuters) - Rapid advances in artificial intelligence, triggered in part by Anthropic's latest automation push, could structurally erode the IT sector's high-margin application services revenues, creating downside risks ​to earnings and valuations, analysts warn. Shares in India's software exporters settled 0.6% lower on ‌Thursday, a day after plunging 6% in their worst session for nearly six years, as AI-driven automation from U.S.-based Anthropic and ‌Palantir fuelled fears of compressed project t ...

Market Overview - The Nifty and Sensex indices traded lower, ending a three-day rally as investors took profits at elevated levels, with the BSE Sensex dropping over 400 points to a low of 83,369 and the Nifty 50 declining over 100 points to slip below 25,650 [15] - The Nifty Smallcap 100 index fell by 1%, while the Midcap 100 index was down 0.5% [15] Sector Performance - Metal and pharma stocks were the worst performers, sliding 2% and 0.7% respectively [15] - IT stocks experienced steep declines due to a selloff in U.S. tech, driven by concerns over new automation tools from Anthropic that could disrupt outsourced IT services and pressure margins for Indian IT companies [2][15] Investment Insights - VK Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, indicated that the Nifty is in a consolidation phase with limited index movement but significant sector divergence [2] - The long-term impact of the recent selloff in IT stocks remains uncertain [2] - India's growth outlook is strong, supported by a growth-focused Budget and trade agreements with the EU and the U.S., which should bolster domestic consumption trends [5][15] Foreign Institutional Investment - Foreign institutional investors (FIIs) were net buyers of Rs 5,236 crore, marking the highest single-day inflow since October 28, following the India–US trade deal that alleviated market concerns [7][15] - Foreign investors extended their buying streak to two days, purchasing Rs 30 crore on February 4, while domestic institutional investors (DIIs) bought nearly Rs 250 crore [7][15] - A key trigger to monitor is the flow of foreign institutional investors; if selling slows and marginal buying increases, broader market strength could follow [6]

Financial Data and Key Metrics Changes - Gross billings increased by 2.9% to $1.06 billion compared to $1.03 billion from the prior year [6] - Gross profit rose 4.5% year-over-year to $135.6 million, with gross margin expanding 100 basis points to 19.3% [8] - Total net sales were $702.9 million, down 0.8% from last year due to challenges in the public sector [8][9] - Diluted earnings per share were $0.82, an increase of 5.1%, while adjusted diluted earnings per share was $0.91, an increase of 16.7% compared to the prior year [11][16] Business Line Data and Key Metrics Changes - Business Solutions segment net sales increased 4.2% to $273.5 million, with gross profit rising 11.4% to $69.8 million [8][9] - Public Sector Solutions net sales were $90.8 million, down 36.8% from a year ago, with gross billings declining 23.7% to $170.7 million [9] - Enterprise Solutions net sales increased 11.9% to $338.7 million, with gross profit growing 7.1% to $48.2 million [10] Market Data and Key Metrics Changes - Retail net sales grew 22%, driven by large deployments as retailers invest in technology [21] - Financial services net sales were up 28%, with gross profit increasing 13% year-over-year [21] - Healthcare net sales grew 19%, with gross profit improving 18% year-over-year [21] Company Strategy and Development Direction - The company aims to expand its solutions-led business, deepen customer relationships, and drive profitable growth in cloud, cybersecurity, AI, and services [11][12] - The strategy includes advancing data center modernization, digital workplace transformation, and supply chain solutions [24][26] - The company expects to outperform the U.S. IT market by 200 basis points in 2026 [26] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in long-term trends supporting the business, despite near-term headwinds like memory supply constraints and inflation [12][30] - The company is focused on operational efficiencies and expense management, with a disciplined approach to capital allocation [20][24] - Management noted that the backlog ended Q4 at its highest level since 2022, indicating strong future demand [26] Other Important Information - The company executed a voluntary retirement offering, resulting in a severance charge of $3.1 million, with expected ongoing annual cost savings of approximately $7 million to $8 million [17][20] - A quarterly dividend of $0.15 per share was paid, and an additional $50 million was authorized for the share repurchase program [18] Q&A Session Summary Question: What is the expected IT market growth for 2026? - Management indicated a blended growth number of around 4% for the U.S. IT market, with internal growth expectations slightly higher [29][30] Question: Why is the company reducing headcount despite a healthy IT market? - The headcount reduction is driven by system improvements and productivity gains from AI, with no additional reductions anticipated [31][32] Question: What was the sales cadence during Q4? - A marked increase in December revenue was noted, with over 38% of the quarter's revenue occurring in that month due to budget consumption and preemptive ordering [40] Question: Were memory supply constraints an issue in Q4? - Management stated that while some price increases were observed, they did not significantly affect Q4 results, and customers were advised to order early due to anticipated constraints [41][42]

Financial Data and Key Metrics Changes - Revenues for Q4 2025 totaled $980.1 million, at the top end of guidance, with IT consulting revenues comprising 63%, up from 59% year-over-year [5][23] - Adjusted EBITDA margin was 11%, exceeding expectations, with free cash flow of $93.7 million, representing a conversion rate of approximately 87% of adjusted EBITDA [5][26] - Net income for Q4 was $25.2 million, with a gross margin of 28.9%, consistent with the prior year [24][25] Business Line Data and Key Metrics Changes - Commercial segment revenues were $698.6 million, a 0.9% increase year-over-year, while federal segment revenues were $281.5 million, a decrease of 3.7% year-over-year [23][24] - Commercial consulting revenues, the largest high-margin stream, increased by 19.2% year-over-year to $339.4 million [23] - Assignment revenue declined by 12% year-over-year, reflecting softness in parts of the commercial segment sensitive to macroeconomic changes [23] Market Data and Key Metrics Changes - In the commercial segment, healthcare accounts improved by mid-teens, while consumer and industrial accounts improved by low teens [13] - Federal segment revenues from defense and intelligence improved low single digits year-over-year, driven by funding for Project Maven [15] - The other clients category in the federal segment saw mid-teens growth year-over-year due to expansion in data, AI, and modernization efforts [15] Company Strategy and Development Direction - The company is transitioning to a new brand, Everforth, to unify its commercial and federal identities and enhance cross-selling opportunities [7] - Strategic acquisitions, such as the recent intent to acquire Quinnox for $290 million, are part of the strategy to enhance digital engineering and global delivery capabilities [8][28] - The focus remains on organic revenue growth while pursuing acquisitions that enhance solution capabilities and technology partnerships [7][8] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about strong demand for AI solutions, with nearly 80% of enterprises planning to increase AI spending in 2026 [4] - The company anticipates strong award activity in the federal segment, particularly in defense and intelligence, as budget support increases [46] - Management highlighted the importance of addressing challenges in scaling AI and integrating it into core business strategies [19][20] Other Important Information - The company generated $288.1 million in free cash flow for the full year 2025, with $170.1 million used for share repurchases [27][28] - The effective tax rate for Q4 was 36.4%, above the forecasted 28%, due to one-time items [25] - The company has approximately $972 million remaining on its $1 billion share repurchase authorization [28] Q&A Session Summary Question: Focus on M&A strategy and comfort with leverage - Management emphasized organic growth as the primary focus, with acquisitions aimed at enhancing solution capabilities based on client needs [36] - Post-acquisition leverage is expected to be at 2.9, which is considered modestly leveraged [38] Question: Capital allocation between stock buybacks and acquisitions - Management noted that both share repurchases and acquisitions are accretive, and a balanced strategy is essential [42][44] Question: Outlook for government consulting business - Management expects strong award activity in the federal segment, particularly in defense and intelligence, despite delays from the government shutdown [46] Question: Client demand for AI and impact on staffing - Management indicated that AI is driving demand, but clients are being judicious with staffing, focusing on outcome-based investments [51] Question: Commercial consulting growth mix and revenue visibility - Growth in commercial consulting is driven by project-based work, with a healthy mix of long-term projects expected to improve revenue visibility [59][61]

Financial Data and Key Metrics Changes - Net sales grew 24.6% to $615 million, with product sales increasing 32.2% year-over-year, driven by strong performance in data center and cloud, networking, and security [5][12] - Net earnings from continuing operations increased 129.3% to $33.4 million, with adjusted EBITDA rising 97% to $53.4 million, reflecting a margin of 8.7%, which is 320 basis points higher than the same period last year [9][17] - Year-to-date consolidated net sales increased 22.2% to $1.86 billion, with net earnings from continuing operations totaling $98.7 million, a 68.5% increase from the previous year [18] Business Line Data and Key Metrics Changes - Product revenue grew 32.2% year-over-year to $501.9 million, while service revenue totaled $112.8 million, slightly down from $113.6 million in the prior year [12] - Managed services revenue grew 10.5%, driven by demand for cloud and enhanced maintenance support, while professional services revenue declined 7.8% due to project delays in the retail sector [12][29] - Security gross billings for products and services grew 16.4% year-over-year, with a 27.6% increase over the trailing twelve months, as customers prioritize cybersecurity investments [8] Market Data and Key Metrics Changes - The company saw growth across all customer size segments, with particularly strong performance in the mid-market and enterprise space [4] - Telecom, media, and entertainment accounted for 27% of net sales on a trailing twelve-month basis, while technology, SLED, and healthcare each accounted for 13% [13] Company Strategy and Development Direction - The company is focused on expanding its solutions portfolio, growing professional and managed services capabilities, and extending geographic reach [10] - The strategy emphasizes AI, cloud, security, and networking, which are seen as key growth areas [4][10] - The company is evaluating acquisitions and investments to enhance its position in higher growth areas and support long-term vision [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in continued growth, supported by industry demand trends and financial flexibility [11] - The company raised its full-year guidance for net sales to 20%-22% year-over-year growth, up from mid-teens, and adjusted EBITDA growth is now expected to be 41%-43% [22][23] - Potential near-term risks include an industry-wide memory shortage, which could impact customer deployments [23] Other Important Information - The company repurchased over 200,000 shares during the quarter and announced a quarterly dividend of $0.25 per common share [5][20] - Cash and cash equivalents at quarter end totaled $326.3 million, down from $389.4 million at the end of the last fiscal year [19] Q&A Session Summary Question: Nature of outsized projects from enterprise customers - Management noted that mid-market customers had the biggest growth, with some large enterprise customers contributing significantly to Q3 performance, but they do not expect to replicate this in Q4 [26][27] Question: Professional services project delays - Management expects project delays from retail customers to materialize in fiscal 2027, attributing the decline in professional services revenue to these delays and a tough comparison to last year's growth [28][29] Question: Inventory build and project timing - Management indicated that inventory levels are expected to remain inflated in the next several quarters due to increased demand and fluctuating projects [34] Question: Impact of AI on business - Management highlighted that AI is now seen as a tailwind, driving growth in data center, cloud, and networking areas, with customers defining use cases to leverage AI capabilities [36][38] Question: Importance of integrated solutions - Management emphasized that offering integrated solutions across AI, cloud, and networking is a key differentiator, as customers prefer to work with fewer strategic vendors [39]

Financial Data and Key Metrics Changes - Gross profit increased 4.5% year-over-year to $135.6 million, with gross margin expanding 100 basis points to 19.3% [6][14] - Total net sales were $702.9 million, down 0.8% from last year due to challenges in the public sector [6][14] - Diluted earnings per share were $0.82, an increase of 5.1%, while adjusted diluted earnings per share was $0.91, an increase of 16.7% compared to the prior year [9][14] Business Line Data and Key Metrics Changes - Business Solutions segment net sales increased 4.2% to $273.5 million, with gross profit rising 11.4% to $69.8 million [6][7] - Public Sector Solutions net sales were $90.8 million, down 36.8% from a year ago, with gross billings declining 23.7% to $170.7 million [7][8] - Enterprise Solutions net sales increased 11.9% to $338.7 million, driven by strong demand for advanced technologies [8] Market Data and Key Metrics Changes - Retail net sales grew 22%, driven by large deployments as retailers invest in technology [19] - Financial services net sales were up 28%, with gross profit increasing 13% year-over-year [19] - Healthcare net sales grew 19%, attributed to large enterprise deployments for electronic health record management [20] Company Strategy and Development Direction - The company aims to expand its solutions-led business, deepen customer relationships, and drive profitable growth in cloud, cybersecurity, AI, and services [9][10] - The strategy includes advancing data center modernization, digital workplace transformation, and supply chain solutions [22][23] - The company expects to outperform the U.S. IT market by 200 basis points in 2026 [23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in long-term trends supporting the business, despite near-term headwinds like memory supply constraints [10][21] - The company is focused on operational efficiencies and expense management, with a disciplined approach to capital allocation [18][21] - Management noted that the backlog ended Q4 at its highest level since 2022, indicating strong future demand [23] Other Important Information - The company executed a voluntary retirement offering, resulting in a severance charge of $3.1 million, with expected ongoing annual cost savings of $7 million to $8 million [15][18] - The board of directors authorized an additional $50 million for the existing share repurchase program and declared a $0.20 per share dividend, a 33% increase [16] Q&A Session Summary Question: What is the expected IT market growth for 2026? - Management indicated a blended growth number of around 4% for the U.S. IT market, with internal growth expectations slightly higher [25][26] Question: Why is the company reducing headcount despite a healthy IT market? - The headcount reduction is driven by system improvements and productivity gains from AI, with no additional reductions anticipated [28][29] Question: How did sales or gross billings perform in Q4? - There was a marked increase in December revenue, with some customers focused on consuming their budget before year-end [35][37] Question: Were memory supply constraints an issue in Q4? - Management noted some price increases but did not consider it a significant issue for Q4, advising customers to order early due to anticipated constraints [38][39]

Financial Data and Key Metrics Changes - Revenues for Q4 2025 totaled $980.1 million, at the top end of guidance, with IT consulting revenues comprising 63%, up from 59% year-over-year [5][23] - Adjusted EBITDA margin was 11%, exceeding expectations, driven by a greater mix of commercial segment revenue [25] - Free cash flow for Q4 was $93.7 million, representing a conversion rate of approximately 87% of adjusted EBITDA, well above the target rate of 60%-65% [26][28] Business Line Data and Key Metrics Changes - Commercial segment revenues were $698.6 million, a 0.9% increase year-over-year, while federal segment revenues were $281.5 million, a decrease of 3.7% year-over-year [23][24] - Commercial consulting revenues, the largest high-margin stream, totaled $339.4 million, a 19.2% increase year-over-year [23] - Assignment revenue declined by 12% year-over-year, reflecting softness in parts of the commercial segment sensitive to macroeconomic changes [23] Market Data and Key Metrics Changes - In the commercial segment, healthcare accounts improved by mid-teens, while consumer and industrial accounts improved by low teens [13] - Federal segment revenues from defense and intelligence improved low single digits year-over-year, supported by additional funding for Project Maven [15] - The other clients category in the federal segment saw mid-teens growth year-over-year due to expansion in data, AI, and modernization efforts [15] Company Strategy and Development Direction - The company is transitioning to a new brand, Everforth, to unify its commercial and federal identities and enhance cross-selling opportunities [7] - The acquisition of Quinnox for $290 million is aimed at enhancing digital engineering and global delivery capabilities, aligning with the company's long-term strategy [28] - The company will continue to pursue strategic acquisitions while maintaining a focus on organic revenue growth [7][8] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about strong demand for AI solutions, with nearly 80% of enterprises planning to increase AI spending in 2026 [4] - The company anticipates strong award activity in the federal segment, particularly in defense and intelligence, as budget support increases [46] - Management highlighted the importance of addressing challenges related to AI deployment and governance, emphasizing the launch of the AI Factory to support clients [19][20] Other Important Information - The company generated $288.1 million in free cash flow for the full year 2025, with $170.1 million used for share repurchases [27][28] - The effective tax rate for Q4 was 36.4%, above the forecast of 28%, due to one-time items [25] - The company has approximately $972 million remaining on its $1 billion share repurchase authorization [28] Q&A Session Summary Question: What is the focus of the M&A strategy? - The company aims to identify solution capabilities in demand by enterprise clients and integrate them across its account base, with recent acquisitions like Quinnox enhancing digital engineering capabilities [36][37] Question: How comfortable is the company with continued leverage? - Post-acquisition, the company expects a net leverage ratio of 2.9x, which is considered modestly leveraged, with a clear path to delever back below the target of 2.5x [38][39] Question: What is the outlook for the government consulting business? - Management expects strong award activity in the federal segment, particularly in defense and intelligence, as budget support increases [46] Question: Can you elaborate on the cost savings plan for 2026? - The company anticipates generating $80 million in cost savings over three years, with moderate savings expected in 2026 and ramping up in 2027 and 2028 [55] Question: What is the mix of commercial consulting growth? - The growth includes a mix of project-based and longer-duration managed work, with significant demand across various solution sets [60][61]

Financial Data and Key Metrics Changes - Gross profit increased 4.5% year-over-year to $135.6 million, with gross margin expanding 100 basis points to 19.3% [6][9] - Total net sales were $702.9 million, down 0.8% from last year due to challenges in the public sector [6][9] - Diluted earnings per share were $0.82, an increase of 5.1%, while adjusted diluted earnings per share was $0.91, an increase of 16.7% compared to the prior year [9][13] Business Line Data and Key Metrics Changes - Business Solutions segment net sales increased 4.2% to $273.5 million, with gross profit rising 11.4% to $69.8 million [6][7] - Public Sector Solutions net sales were $90.8 million, down 36.8% from a year ago, with gross billings declining 23.7% to $170.7 million [7][8] - Enterprise Solutions net sales increased 11.9% to $338.7 million, driven by strong demand for advanced technologies [8][9] Market Data and Key Metrics Changes - Retail net sales grew 22%, financial services net sales were up 28%, and healthcare net sales grew 19% year-over-year [18][19] - The company expects to outperform the U.S. IT market by 200 basis points in 2026, with a blended growth number of around 4% for the market [22][25] Company Strategy and Development Direction - The company aims to expand its solutions-led business, deepen customer relationships, and drive profitable growth in cloud, cybersecurity, AI, and services [9][10] - The strategy includes focusing on data center modernization, digital workplace transformation, and supply chain solutions [19][21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in long-term trends supporting the business, despite near-term headwinds such as memory supply constraints and inflation [10][19] - The backlog ended Q4 at its highest level since 2022, indicating strong future demand [22] Other Important Information - The company executed a voluntary retirement offering, resulting in a severance charge of $3.1 million, with expected ongoing annual cost savings of approximately $7 million to $8 million [12][14] - The board of directors authorized an additional $50 million for the existing share repurchase program and declared a $0.20 per share dividend, a 33% increase [15] Q&A Session Summary Question: What is the expected IT market growth for 2026? - Management indicated a blended growth number of around 4% for the U.S. IT market, with internal growth expectations slightly higher [25][26] Question: Why is the company reducing headcount despite a healthy IT market? - The company is realizing efficiencies from system improvements and AI-driven productivity gains, leading to headcount reductions [27][28] Question: What was the cadence of sales during Q4? - There was a marked increase in December revenue, with over 38% of the quarter's revenue occurring in that month due to customers consuming budgets before year-end [33][34] Question: Were memory supply constraints an issue in Q4? - Management noted that while there were some price increases, memory supply constraints did not significantly affect Q4 results [35][36] Question: What are the expectations for operating margins going forward? - The company anticipates improved operating leverage and aims to reach operating margins closer to 3.7% to 3.9% by the end of the year [37][38]

Financial Data and Key Metrics Changes - Revenues for Q4 2025 totaled $980.1 million, at the top end of guidance, with IT consulting revenues comprising 63%, up from 59% in the prior year [5][24] - Adjusted EBITDA margin was 11%, exceeding expectations, driven by a greater mix of commercial segment revenue [26] - Free cash flow for Q4 was $93.7 million, with a conversion rate of approximately 87% of adjusted EBITDA, well above the target rate of 60%-65% [27][28] Business Line Data and Key Metrics Changes - Revenues from the commercial segment were $698.6 million, an increase of 0.9% year-over-year, and up 2.2% sequentially on a billable day adjusted basis [24] - Federal government segment revenues were $281.5 million, a decrease of 3.7% year-over-year [25] - Commercial consulting revenues, the largest high-margin revenue stream, totaled $339.4 million, an increase of 19.2% year-over-year [24] Market Data and Key Metrics Changes - In the commercial segment, year-over-year growth was driven by healthcare accounts improving by mid-teens and consumer and industrial accounts improving by low teens [13] - The federal segment saw defense and intelligence revenues improve low single digits year-over-year, partly due to additional funding for Project Maven [16] - The TMT vertical achieved low single digits revenue growth compared to the prior year [14] Company Strategy and Development Direction - The company is transitioning to a new brand, Everforth, to unify its commercial and federal brands and enhance operational efficiency [7][8] - Strategic acquisitions will continue to be pursued to enhance solutions and capabilities, with the recent intent to acquire Quinnox for $290 million [9][28] - The focus remains on organic revenue growth while balancing capital deployment between share repurchases and strategic investments [43] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in strong demand for AI solutions, with nearly 80% of enterprises planning to increase AI spending in 2026 [4] - The company anticipates strong award activity in the federal segment, particularly in defense and intelligence, as budget support increases [46] - Management expects to see heavy award activity in the first half of the year, with growth realized in the second half [47] Other Important Information - The company generated $93.7 million in free cash flow in Q4 and repurchased $64.2 million in shares [27][28] - The effective tax rate for Q4 was 36.4%, above the forecast of 28%, due to one-time items [26] - The company has approximately $972 million remaining on its $1 billion share repurchase authorization [28] Q&A Session Summary Question: Focus on M&A strategy and comfort with leverage - Management emphasized organic growth as the primary focus, with acquisitions aimed at enhancing solution capabilities based on client needs [36][38] - Post-acquisition leverage is expected to be at 2.9, which is considered modestly leveraged [39] Question: Capital allocation between stock buybacks and acquisitions - Management noted that both share repurchases and acquisitions are accretive, and a balanced strategy is essential [43][44] Question: Outlook for government consulting business - Management expects award activity to improve as budget support increases, particularly in defense and intelligence [46] Question: Client demand for AI and impact on staffing - Management indicated that AI is driving demand, but clients are not halting traditional projects in favor of AI [51][80] Question: Cost savings plan for 2026 - Management outlined a net $80 million cost savings plan over three years, with moderate savings expected in 2026 [54] Question: Commercial consulting growth mix - Growth was driven by project-based implementation work, with a healthy mix of long-term projects [58][60]

Financial Data and Key Metrics Changes - Net sales grew 24.6% to $615 million, with product sales increasing 32.2% year-over-year, driven by strong performance in data center, cloud, networking, and security [5][12] - Net earnings from continuing operations increased 129.3% to $33.4 million, with adjusted EBITDA rising 97% to $53.4 million, reflecting a margin of 8.7%, which is 320 basis points higher than the same period last year [9][17] - Year-to-date consolidated net sales increased 22.2% to $1.86 billion, with gross profit rising 23.7% to $469 million [18] Business Line Data and Key Metrics Changes - Product revenue grew 32.2% year-over-year to $501.9 million, while service revenue totaled $112.8 million, slightly down from $113.6 million in the prior year [12][16] - Managed services revenue grew 10.5%, while professional services revenue declined 7.8% due to project delays in the retail sector [12][28] - Security gross billings for products and services grew 16.4% year-over-year, with a 27.6% increase for the trailing twelve months [7] Market Data and Key Metrics Changes - Growth was observed across all customer size segments, particularly in the mid-market and enterprise space [4][5] - Telecom, media, and entertainment accounted for 27% of net sales, while technology, SLED, and healthcare each accounted for 13% [13] Company Strategy and Development Direction - The company is focused on expanding its solutions portfolio, enhancing professional and managed services capabilities, and extending geographic reach [10] - There is an emphasis on AI, cloud, security, and networking as key growth areas, with plans to enhance AI envisioning sessions and acceleration offerings [10][21] - The company is evaluating acquisitions and investments to enhance its position in higher growth areas [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in continued growth, supported by industry demand trends and financial flexibility [11][21] - The company raised its full-year guidance for net sales to 20%-22% year-over-year growth, up from mid-teens [21] - Potential near-term risks include an industry-wide memory shortage impacting customer deployments [22][23] Other Important Information - The company approved a quarterly dividend of $0.25 per common share and repurchased over 200,000 shares during the quarter [5][20] - Cash and cash equivalents at quarter end totaled $326.3 million, down from $389.4 million at the end of the last fiscal year [19] Q&A Session Summary Question: Nature of outsized projects from enterprise customers - Management noted that mid-market customers had the biggest growth, with some large enterprise customers contributing significantly in Q3, but they do not expect to replicate that in Q4 [26][27] Question: Professional services project delays - Management expects project delays from retail customers to materialize in fiscal 2027, attributing the decline in professional services to a few customers and tough comparisons from the previous year [28] Question: Inventory build and project timing - Management indicated that inventory increased due to demand, and they expect inventory levels to remain inflated in the next several quarters [33] Question: Impact of AI on business - AI is now seen as a tailwind, driving growth in data center, cloud, and networking areas, with customers defining use cases to modernize legacy systems [35][36] Question: Importance of integrated solutions - Management highlighted that offering integrated solutions across AI, cloud, and networking is a key differentiator, as customers prefer to work with fewer strategic vendors [37][38]