ScanSource Inc. (NASDAQ:SCSC) stock jumped Thursday after the company reported fiscal fourth-quarter 2026 results that beat Wall Street expectations, driven by strong hardware demand.

During the earnings call, ScanSource CEO Mike Bauer said the company has shifted to a mindset of “winning instead of defending,” with a greater focus on taking market share.

He acknowledged the company had become somewhat complacent about expanding its share and said the new approach should continue through 2027.

Bauer also highlighted the planned MicroAge acquisition, which will expand ScanSource into AI, data centers, cloud and cybersecurity.

He said the deal could enable services that “none of our competitors can offer our channel.” Meanwhile, CFO Steve Jones pointed to a “very strong demand environment” and the return of large deals during the second half.

ScanSource Earnings Beat Estimates

ScanSource reported adjusted earnings of $1.46 per share, beating the $1.14 estimate. Net sales rose 17.3% to $953.109 million, topping the $802.063 million estimate.

GAAP earnings rose 40.9% year over year to $1.24 per share. Adjusted earnings increased 43.1% to a company record.

Gross profit rose 14% to $119.8 million. However, gross margin narrowed to 12.6% from 12.9%. Adjusted EBITDA increased 19.4% to $46.1 million.

Hardware Demand Drives Growth

Specialty Technology Solutions sales rose 17.6% to $927.2 million, with a gross margin of 10.1%. Intelisys & Advisory sales increased 7.2% to $25.9 million, with a 99.3% gross margin.

Recurring revenue increased 13.5% and accounted for 31.5% of gross profit. U.S. sales jumped 20.8%, while Brazil sales fell 21.6%.

For fiscal 2026, recurring revenue increased 10.6%. Its share of gross profit rose to 33.7% from 32.8%.

Operating cash flow totaled $123.1 million, while free cash flow was $113.8 million. ScanSource ended the period with $88.4 million in cash and $101.4 million in debt. The company spent $97.9 million on share repurchases.

MicroAge Deal Expands Higher-Margin Business

Separately, ScanSource agreed to acquire MicroAge for $220.5 million in cash. ScanSource plans to fund the transaction through its credit facility.

The deal is expected to close in the quarter ending Sept. 30, subject to regulatory approval.

ScanSource expects the acquisition to be free-cash-flow positive. It also expects the deal to immediately boost gross margin, adjusted EBITDA margin and non-GAAP earnings per share in the first year.

MicroAge has more than 200 associates and about 2,400 U.S. clients. The acquisition expands ScanSource’s capabilities in cloud, cybersecurity, data centers and artificial intelligence.

“The acquisition expands ScanSource’s total addressable market, adds new services capabilities, and provides greater visibility into end-user needs,” Chair and CEO Mike Baur said.

ScanSource Issues Strong 2027 Outlook

ScanSource expects fiscal 2027 sales of $3.42 billion to $3.549 billion, above the $3.198 billion estimate. The forecast represents growth of 6% to 10% and excludes MicroAge.

The company expects adjusted EBITDA of $158 million to $165 million and free cash flow of at least $85 million.

ScanSource also set three-year targets that include 5% to 7% compound annual gross-profit growth. It expects recurring revenue to reach 50% of gross profit and adjusted EBITDA margin to approach 6%.

The company also targets free-cash-flow conversion above 80% and adjusted return on invested capital in the mid-teens.

ScanSource cited economic weakness, inflation, tariffs and changes in trade policy among its risks.

SCSC Price Action: ScanSource shares were up 18.30% at $60.83 at the time of publication Thursday, according to Benzinga Pro data.