Hey, good afternoon, everyone. Thanks for joining us today. For our next session, we have Insight Enterprises CEO, Jack Azagury, and CFO, James Morgado. Thank you both for joining us today. Great to have you here. Maybe Jack, just starting off with you know, I think you're now about five weeks into the role. You recently mentioned you've been spending a lot of times with the teams, partners, et cetera. You know, what has surprised you the most about Insight versus, you know, your expectations coming in from nearly three decades at Accenture?
Yeah. The good news, I had done a lot of homework before I joined. A lot of homework. In terms of where we're at and the financials, the numbers, and so on, not much has surprised me. I would say a few things have been very positive. I've met with every one of our major OEM partners, and the feedback, the desire to partner, the desire to make, you know, especially make sure we help them in the mid-market, has been excellent. I'd say probably the one thing I hadn't done before I joined was meet with our employees, and I've probably met over 1,000 employees now in the first four or five weeks.
The depth of engineering skills, the depth of capability, the depth of our services capability have been, you know, very impressive. The company did a lot of very good acquisitions, be it Amdaris or Inspire11 or Securo, or, I mean, InfoCenter, very, very good services capabilities which have been a very good surprise. You know, now we're working on executing, you know, putting in place our plan for 2026 through to 2029. The company left me with a very good print on Q1, which I'm fortunate. We set our capital allocation strategy for the year, with buying back close to, you know, 10%. Oh, you can't hear me?
That's good? Okay. I was trying to figure out what the sign was. We're buying back 10% of the company. I think the stock is, you know, priced where we need to be buying. We're stopping acquisitions for the year. My theme with the team, I've left two themes with our teammates. One is focus and execution. We've done a lot of great acquisitions. We now need to position in the right way to help our clients transform with AI. The second theme has been One Insight.
A lot of acquisitions means we now need to integrate them, position them with an integrated AI offering, especially focused on the mid-market, and make sure we optimize that, and we drive the cross-sell and the adoption of AI with our clients.
Oh, got it. No, that was a great overview, and definitely wanna hit on some of those topics.
Yep.
Before I do, James, over to you, actually. You know, you've also been full year as CEO now.
Yeah.
You've had to deal with a lot of turbulence, tariffs, partner program changes, CEO transition, et cetera. You know, now that the backdrop is kind of behind us, dare I say, what's the one thing you're looking forward to most in terms of focusing in on after we kinda got past this maybe more turbulent backdrop?
Yeah. Boy, when you put it like that, Joe, I think vacation may be top of the list.
You have to ask Jack first, though.
Actually, you know, first and foremost is to preserve the areas that we've made progress on. If I think about our gross margin, that's an area where we've made significant progress. I think, you know, being a good steward of the P&L, of the balance sheet.
That wasn't me.
Did we lose it? Okay. Being a good steward of the balance sheet, obviously. Really when I look at it, we still have, from an organic standpoint, I think we still have areas that we need to invest. In order to drive that and still drive operating expense leverage, I think that's one of the key focus areas as we move forward.
Yep.
Is that mic not on?
Is it mine? Is this one working? No.
No.
This one is definitely dead. Is this working? No?
Here, try this one, Jack.
Okay.
Leave the mics as is, I think.
Okay, o kay. Got three mics.
Maybe just going back over to you, Jack. You know, one of the things you mentioned on the last earnings call was not being pleased with the organic growth in services. Can you unpack what you think is holding back the organic growth at Insight there for specifically services, and what does the fix look like over the next 12 to 18 months?
With three areas of focus, no surprise, capital allocation, top line growth, and operating leverage. I'll focus my answer on the top line growth. I think, look, we've done a lot of great acquisitions back to back. They haven't been fully integrated. We need to reposition our acquisition into an integrated I've talked to the team about a One Insight motion, a One Insight operating model. We need to position these acquisitions with an integrated AI motion for our clients. AI advisory, cloud, data security, hybrid cloud, and ServiceNow. Those are the services we offer. I'm not planning on adding things.
We now need to execute and keep productizing those offerings, embedding AI on all of these so we can deliver more value at greater pace, at lower cost for our clients. The second thing is enabling our account executives. You know, this pivot from value-added reseller to solution integrator is not a trivial one. The company's been on a journey for over five years, we're gonna accelerate that transition.
That means more training for AEs, which we've already started over the last few weeks, which means equipping our AEs with an AI sales coach that we've started to build and deploy in parts of our business, and we're gonna be deploying at scale to help our AEs get to, Here's the client context, here's what they have, you know, Here are the five things, the five discussions you need to have and w e've already started to see very good results from that technology, and we're gonna deploy it at scale. Then putting the right metrics and measures in place focused on organic growth. Sometimes when you do a lot of acquisitions, you know, the organic component, you know, doesn't get as much focus. Well, this year it is all about organic growth. That's what I'm gonna be measuring.
That's what I want the team to be focused on. You know, it's execution with our executives, our account executives, execution in terms of prioritizing our go-to-market and making sure we continue to embed AI in everything we do.
No, got it. Maybe part of that, you also made a decision to directly oversee the North America business.
Yeah
In addition to serving as CFO, maybe walk us through the thought process there and what you were trying to achieve before what I would imagine would be a natural handoff to a dedicated leader.
Yeah. The North America leader left the company two weeks before I joined, which we knew and had planned for. I'm not filling that position in the short term, I'm leading not only the company globally, but the North America team. I do have over 20 direct reports, but I wanted the opportunity to delve two or three layers down in the business, A, learn the business faster, but then effectuate change faster. All our North America solution leads and our go-to-market teams report to me.
I meet with them every week and, you know, it's just a way to get the focus, the execution, moving at a greater pace and for me to get up to speed at greater pace. It's been great. I'm in no hurry to fill the position. Probably, you know, maybe back end of the year, early 2027, we'll see when I find the right candidate. That's something that has certainly helped me get up the learning curve a lot faster than I would've otherwise.
No, makes sense. Maybe shifting gears to AI. You know, I think for much of the prior years, Insight, as well as the broader peer group, have kind of described customers being in more of a pilot mode.
Yep.
You know, as we think about 2026, either now or even kind of going into the back half, is that still the case? Are we starting to see some more material investments and strategic deployments of AI at your customers? I have a follow-up to that.
I have gotten this repeatedly wrong. I published research in my prior life, y ou know, OpenAI got released, what, November, December of 2022, and, you know, released reports in 2023 and 2024 and 2025. Almost every year my position was, this year is the year of deployment at scale, getting true value in the top line or the bottom line. This is when we go to scale, t his is when we reinvent processes end-to-end. Most companies are not there, and certainly in the mid-market, most companies not there. There's a big gap between what the technology can do and what it's actually doing in the enterprise. The gap is even bigger in the mid-market than it is for the Fortune 500 or Fortune 1000. That does present a significant opportunity.
You know, right now you still do see a lot of pilots, y ou do see a lot of point solutions, y ou do see, you know, if a mega process has 20 steps, you see point solutions in step two and step seven, but you haven't reinvented the entire process to be able to drop, you know, the cost of that process and change the headcount needed to. People are getting an extra coffee break, but the process is not reinvented. I do believe we are gonna see that gap close. Now the reality is that technology is still moving at a very rapid pace. What was possible six months ago with some of the models and what is possible now is dramatically changed.
I see an intent to close the gap. I see more companies putting rigor on their business cases. I see more companies focused on deploying at scale. The understanding in the C-suite and in the offices of our clients has increased dramatically, and with that understanding, a better view of what can be done with AI, and t hat's our role. Our role is to help companies deploy the technology, get value from it, measure the impact, get the adoption, do the training, and realize the potential that AI can provide, you know, with the current technology, the potential is immense. There is a big gap between potential and current adoption.
Let's talk about that. You mentioned, you know, Insight's role. Maybe talk to how Insight is engaging with customers today on their AI journey, and then maybe a second layer to that question is, how is Insight's engagement model or how do you view Insight's engagement model evolving as this technology evolves?
Yep. you know, when you look at our proposition, it's hardware, software, cloud, and services. One of the very valuable things is most clients, first of all, have a hybrid footprint. They're doubling down on the cloud, and that's accelerating. The growth in on-prem and is very significant. The cloud is outpacing on-prem, but on-prem is growing at a solid clip. When you look at our capability, our hardware skills, you know, the capabilities we have with Cisco and Dell and HPE, those give us great insight in terms of bridging, you know, the on-prem infrastructure with the cloud infrastructure. You look at our partnership with Microsoft and Google and AWS, you know, give us great understanding of their product roadmaps and the engineering behind the solution.
The VAR capability and the product and OEM knowledge is a great complement to our services capability. When you look at our services, it's very simple. We've got an AI advisory capability that came to us primarily through a number of acquisitions, but the Inspire11 acquisition was transformative for that. As I said, our swim lanes are cloud migration and cloud adoption, data and data migration and data strategy, security, which I think has tremendous upside, especially with what we're seeing in terms of, you know, threats from, you know, what the models can and will be able to do. And then hybrid cloud and the engineering behind hybrid cloud. Those are the swim lanes that we're gonna be focused on and investing, especially data and security.
Those are areas that are receiving additional attention right now.
Got it. Maybe shifting gears again, you know, cloud growth, we've seen a re-acceleration here over the past couple of quarters after some declines.
Yep
That we've seen that were kind of more program changes driven at your partners. Maybe talk about what overhangs still remain around those changes, and as we start to lap some of these comparisons over the next couple of quarters, how should investors think about a more normalized growth trajectory there? Sorry, long-winded question, but has some of the growth vectors changed relative to what you were seeing maybe in the prior years in terms of where the spend is coming from within that cloud profile?
Q1 was very, very strong on cloud, heavily driven by Microsoft, but very strong growth in our business. Very pleased with that. We had partner program changes last year and the year before with Google and Microsoft, and the direction of travel with both our partners was very consistent. They want us to serve the mid-market, resell into the mid-market, and they are taking the enterprise Fortune 500, Global 2000 relationships directly. For the most part, that is now behind us, w e still have a little bit of overhang with Google reselling Q4 'cause those were multi-year contracts, but those are all factored into our guidance.
The appetite, you know, from our clients to keep migrating to the cloud, leveraging the cloud, leveraging cloud solutions like Microsoft 365 and Copilot and Agent 365 and Gemini, there's a tremendous amount of appetite and, you know, we have the capabilities to help them get adoption and get value from those capabilities. James, anything?
I think that was well said. The only thing that I would add is last year, the partner program changes masked the performance in cloud. We tried to call out the underlying growth that we were seeing. When you look at it that way, Q1 was still by all means really strong. You know, last year's performance was masked. It was still the underlying growth was still pretty strong last year. As we look out, I think Q4 is still potentially some headwind associated more with the Google side of the house. As we head into 2027, all of that would be behind us.
Really pleased with the progress we're seeing with the cloud performance in Q1.
No, got it. Maybe we can just double-click on Google and just get a little update in terms of where that business stands today, just given that that one kinda faced a little bit more of the brunt of some of the changes just because of the relative mix of when you guys acquired it. You know, what major changes have you already made? What still needs to be done? As investors are looking at the business, like what key milestones, or even for yourselves, what key milestones are you guys looking out for?
I'll start then, Jack. Jack, you can add in. From a Google standpoint, the reason that it's taking longer in terms of the economic impact to us is because of the nature of the business that we acquired from SADA. We had a Google business before SADA, but it was relatively small. It was actually the number three out of the three large hyperscalers for us. With the SADA acquisition, it overnight became the number two cloud player in the space for us. Those contracts are longer for Google than what we see in Microsoft. They tend to be in the two to three-year timeframe.
As a result of pivoting that business at renewal, at renewal point, it just takes longer because of those longer term agreements. SADA is also highly concentrated into enterprise, whereas in the Microsoft business, we had a nice corporate and mid-market and rapidly growing space there. It just takes a little bit longer for us to pivot that business. We are through the pivot in terms of the resources, the focus into the corporate and mid-market space, and the double down on the in the growth of services, which we've seen throughout last year and inclusive of Q1 of this year. We've seen nice growth in the services side of the Google business.
What we'll watch closely as the year progresses, in particular Q4, to judge any over-performance in that business and what that sets up into 2027, but t hat's a key milestone for us, in particular around the resale side aspect of this with GCP. We'll continue to monitor the growth in the core services but t he pivot in terms of the resources is behind us. We just need to continue to execute.
I will say, putting aside the partner changes on the GCP side, the capabilities we bought.
With SADA, are very, very strong. We won Partner of the Year for Google Workspace. That team delivered some of the largest workspace migrations, you know, globally. A very, very talented team with deep engineering, GCP engineering capabilities, so v ery pleased with the talent that came over from SADA.
No, got it. Maybe just one more follow-up there. I think part of the strategic rationale in terms of acquiring the SADA was not only diversification from Microsoft itself being an outsized percentage of the cloud business, but there's also kind of this revenue synergy or top-line synergy in terms of potentially being able to see some pull-in as customers look to go to a more hybrid strategy. Have you guys started to see any of that kind of pollinate and you guys essentially cultivating any of that op-opportunity, or is that still to come?
I mean, we have a lot. I mean, most of our clients have some hybrid posture where it's on-prem, multi-cloud environment. Having those capabilities across all three hyperscalers, having the hardware capabilities to support them on their on-prem, that is tremendous value to our clients. I mean, our clients are gonna have a hybrid posture across multiple cloud providers and across on-prem and cloud. That's all we need to help them, you know, implement and get their value from.
Okay. Maybe moving to hardware. Obviously, I think at the end of last quarter or at the earnings call last quarter, it was characterized hardware backlog exited similar rate to COVID levels, which is quite striking if we remember the COVID times. Maybe just help us think about what's driving that, you know, how much is related to demand pull forward, supply constraints, et cetera. How are you guys accounting for potential decommits or cancellation risks that might drive some of that backlog to evaporate?
Yeah. A very strong Q1, you know, across most of our hardware categories, especially servers, v ery, very strong growth on the server side. Some of that was pull through, but there's also a tailwind of the need to move, you know, AI, you know, people moving AI workloads on-prem. There's both a macro in terms of the need for additional compute, as well as an amount of pull through in Q1. Hard to quantify what is pull through, what is not, but we're gonna see, you know I think there's continued growth on the compute side, and on the storage and on the networking side. Our backlog is at record levels we haven't seen since COVID.
We're monitoring that data, and so far, all our partners have been able to meet their delivery dates, despite a very, you know, heated up environment with a tremendous volume. Our clients spending a lot of time advising our clients on how to navigate through these price increases, which on the server side and to some extent on the laptop and desktop side is significant. Making sure they're speccing in the right way, helping them, you know, buy what they need to buy and, you know, a lot of advisory work helping our clients figure out their hardware, their hardware strategy in the midst of very significant price increases.
I would just add to that in terms of the health of the backlog, we monitor this very closely to see if we see cancellations, and thus far the health has been solid. We're not seeing any trend of cancellations. Bookings, we mentioned in our earnings call that bookings in Q2 have started strong, similar to what we saw in Q1, which is a good sign. We've maintained a prudent stance in our outlook, particularly around hardware. I think it's important for us to see how Q2 evolves and to see what happens to that backlog as we execute Q2. Certainly strength headed into the quarter and continued strength in bookings as the quarter had started.
Got it. Maybe just as a follow-up there, can you give us an update in terms of, like, what you guys are seeing from a pricing and supply constraint backdrop? Are things worsening, getting better? Maybe more importantly, are we just seeing more predictability at this point in time, or is things still a little bit more chaotic from your vantage?
Yeah. Predictability is hard to say. Is it more predictable now? I think maybe it is, we're a little more used to the trends that we're seeing than anything else. You know, I think cost increases are certainly still something we are seeing. In terms of commitments, we're seeing the OEMs meet the commitments. We are seeing some lengthening of future commitments, just the time it would take and what they're committing to. So far all commitments have been made. We're not seeing that as a trend thus far.
No, m akes sense. Just on that though, one of the concerns that we get from investors each quarter is around the potential risk of OEM partners. Obviously they're getting impacted by the cost inflation as well, looking to the channel partners to maybe capture some of those changing, or capture some savings in terms of changing some of the programs with you guys. Can you talk to whether you're seeing any of that behavior across your OEM relationships today, and how are you thinking about that risk dynamic playing out into the back half of this year?
I certainly hear that being a concern. I'll tell you what we're seeing in the business, w e're not seeing that today. You know, especially as you look into the corporate and mid-market space, the reach that's required there, I think the channel is really critical to the OEMs. You know, I think what's critical to our partners is that we execute on where they want us focused, and that's part of the value that we bring. As long as you, as a partner, you can execute to those, I think you still have the same earning potential that you did in the past.
It's a trend that we will continue to keep our finger on the pulse of, but thus far I haven't seen that. Partners change their programs all the time. I think that this year is no different. In terms of our as I look at our earning potential, I see no change in that for this year.
One of the pieces of feedback is our partners don't want us to be transactional. They like the advisory and services capability that we provide, t hey want us to, you know, advise our clients on the right reference architecture, t hey want us to advise our clients on, you know, how to drive adoption of the AI solutions that they're selling. They want us focused, you know, most of them focused on the mid-market, and they want us to pair our advisory and services skill with the resale to help our guide our clients towards the right products, the right solutions, the right architectures, and ultimately adoption of AI.
No, makes sense. Just wanna open it up to the room if there's any questions. I see one already in the front, but please just raise your hand. Two in the front. Please just raise your hands, and we'll get a mic over to you. Sorry, just wait for them. I've been instructed.
Thank you. I just noticed a, even though they look like they're all selling the same thing, if I look at AHEAD or World Wide Technology, and they're multi-billion dollar businesses selling Dell, and Hewlett-Packard, and Cisco, growing very smartly, and then I look at yourselves, or CDW, or maybe even a portion of Accenture, very different. Is that more to do with who the customer is, or is it more to do with the chosen business model, or something else?
A couple of things. I think, first of all, when I look at where we're gonna invest and where we're gonna drive growth, it's infrastructure and AI infrastructure, it's cloud, and it's services, and we're gonna be very focused on those three pillars of growth going forward. You know, the second thing is, you know, and when we look at our growth rates in cloud, for example, a tremendous growth rate. When we look at the service capabilities we have, a tremendous opportunity to help with the cloud adoption. You know, this year the focus is gonna be, I think, we have to execute better. Our growth rates, organic growth rates over the last two or three years are not satisfactory to me.
Does that mean someone else necessarily got the business or?
It depends on which service line, but, you know, we need to do better on organic growth, and that's why I've stopped M&A for this year. We've gotta, you know, integrate what we have, w e've great capabilities. We're gonna move to a One Insight operating model, I've shared that with the team, and equip our salespeople to leverage the full capabilities that we've acquired and built over the last few years. We have strong growth opportunities ahead of us, I'm convinced.
I would just add that we do not service the hyperscalers or the neoclouds as well from a hardware standpoint. You know, we don't speak to competitors, but from our standpoint, when you look at where hardware growth especially has been, has been very acute over the last year plus has been in the hyperscalers and neocloud standpoint. We focus traditionally on the enterprise and the corporate and mid-market space when it comes to hardware and hardware infrastructure.
Do, for the part of either AHEAD or Worldwide that's not selling to CoreWeave or LandUp, but selling to, whatever, JP Morgan, or Chili's, or some other midsize company, is there willingness to potentially take lower margins, allowing them to grow faster, or is there a trade-off on for that on that, Andy?
I'm not gonna comment on what they do, but the team has put a lot of discipline on increasing our gross margins over the last few years. We've gone up from 15% to low 20s. We're gonna continue that pricing discipline. I don't see, certainly in services, I don't see a pressure on gross margins. You know, we wanna grow profitability, and I think there's plenty of market opportunity to do that.
The gross margin improvement isn't necessarily because of pricing activity, it's more because of a mix thing, right?
No. A lot of the growth margin improvement that's happened over the last year or two has been pricing discipline, execution discipline, especially on the services business. We're gonna continue with that, and, you know, we're looking to grow and grow ahead of the market, but do that profitability. We're not gonna compromise our margins to drive the growth. I don't think it's needed.
Thank you.
Go ahead.
I know you said you're pausing M&A for now, but are there longer term, are there specific verticals that you wanna target? You mentioned-
Yeah
....data security, like, you know?
We're pausing M&A for now. We'll get back to M&A when a few things are in place. A leverageable operating model, our OPEX leverage, our PE multiple, a number of things that I wanna see in place before we get back to M&A, we will get back there, you know, we'll be back to M&A eventually. The areas where we're gonna continue to invest, again, it's AI advisory, cloud, data security, hybrid cloud. Those are the swim lanes we're gonna be in. That's where we're gonna invest, we're investing organically now, especially data and security we're investing. Those are the swim lanes we're gonna invest in, primarily in our services business.
Any other questions from the room? Can you please pass them? Yep.
Hey, thank you. I guess, with regards to partner program changes, is there any concern that, as some of, you know, Microsoft and Google use AI internally to boost their productivity, that their sales forces might be able to penetrate mid-market in the next three, four, five years and maybe push you guys further into smaller clients?
I spent a lot of time with our partners, including Microsoft and Google. First of all, they're not building a team on the mid-market. They're not building services, they're not building a sales team. You know, there's no doubt AI can drive sales productivity and services productivity. You know, we're gonna be driving that internally. I wanna make sure, you know, there's been a massive AI adoption program at Insight well before I joined. We're gonna continue to invest in that. We've trained all our people on our leveraging our own training solution, AI Flight Academy.
Many of our offerings have AI fully embedded, and we're continuing to invest in productizing our offerings so we can sell them in one-to-many motion to the mid-market. My job and our team's job is to make sure we stay ahead of those productivity increases, both on the sales and on the delivery and service side, and get greater productivity than others. As long as we continue to drive productivity ahead of, you know, leverage the technology, I think we'll be well positioned. Yeah, I mean, we need to be able to deliver, you know, better product at a cheaper price, faster outcome for our clients leveraging AI.
We need to have a sales force, that is more efficient equipped with AI, and we're gonna be doing both of those.
Any other questions from the room?
Yes, 'cause you came from Accenture.
Please, can you just use the mic so they can hear you?
You came from Accenture, right?
Yeah.
Yep. Forgive me, if you just explain briefly what your role was there. Are you aware, or do you believe Accenture is going to be stepping up its efforts to move into the mid-market? How might those dynamics play out?
Yeah. I was with Accenture for 30 years, I was the global CEO for our consulting business, responsible for our 55,000 consultants, all our industry teams and all our functional teams of finance, supply chain, HR. I was also responsible for our global industry ex manufacturing and engineering business, and was in the C-suite for about 15 quarters. I'm not gonna comment on their strategy. Yeah.
Do you see the mid-market getting more competitive?
The mid-market, first of all, is underserved relative. I mean, I've traditionally, my career's been in the Global 2000. The mid-market is, A, underserved. 2, they don't have the investment capacity to invest in the talent needed in AI, in security, in data engineering. It is a very fragmented market, both in terms of the providers in the market itself. I think there's still a lot of white space there. I am not concerned about, you know, where the competition is. We have to execute with discipline, and there's just tremendous opportunity there. We, you know, there's plenty of opportunity for us to go and build a business and grow at a strong pace in that market.
Okay. Maybe I'll sneak a question in here. James, over to you maybe. You've referenced the opportunity to kinda bring down OPEX intensity. I think right now you're roughly in, like, kinda that low 70s, high 60s of gross profit.
Potentially bringing that down to the lower 60s over time. Maybe just walk us through some of the levers there, as it relates to both costs as well as volume. How should investors think about the timeline relative to a more material inflection in tracking towards that low 60 target or bogey?
I think in terms of what our long-term target is, I think we would update at a future investor day in terms of how we see that long-term target. I'm certainly quite constructive on the opportunity that is there. You know, we have an excellent If I go through some of the areas where we have levers, I think we have an excellent footprint in the Philippines, which gives us a cost arbitrage advantage. I think there's additional opportunities to leverage that. From an AI standpoint, we wanna continue to be customer number 0. I think that there's an opportunity to drive efficiency and productivity across our quote-to-cash process and all the back office and mid-office functions.
You know, that I think that there's tremendous opportunity not only to drive operating expense leverage, but also to create room to make the investments where Jack thinks we need to make the investments from a strategic standpoint.
Oh, got it. With that, I think we're at time.
Right on time.
Thanks, Jack. Yeah.