Technology distribution company ScanSource (NASDAQ: SCSC) missed Wall Street’s revenue expectations in Q4 CY2025 as sales rose 2.5% year on year to $766.5 million. The company’s full-year revenue guidance of $3.05 billion at the midpoint came in 3% below analysts’ estimates. Its non-GAAP profit of $0.80 per share was 20.8% below analysts’ consensus estimates.
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ScanSource (SCSC) Q4 CY2025 Highlights:
- Revenue: $766.5 million vs analyst estimates of $782.5 million (2.5% year-on-year growth, 2% miss)
- Adjusted EPS: $0.80 vs analyst expectations of $1.01 (20.8% miss)
- Adjusted EBITDA: $31.19 million vs analyst estimates of $36.47 million (4.1% margin, 14.5% miss)
- EBITDA guidance for the upcoming financial year 2026 is $145 million at the midpoint, below analyst estimates of $151.3 million
- Operating Margin: 2.3%, in line with the same quarter last year
- Free Cash Flow was $28.86 million, up from -$8.16 million in the same quarter last year
- Market Capitalization: $972.7 million
“For the quarter, our team delivered net sales and gross profit growth in both segments, along with strong free cash flow,” said Mike Baur, Chair and CEO, ScanSource, Inc.
Company Overview
Operating as a crucial link in the technology supply chain since 1992, ScanSource (NASDAQ: SCSC) is a hybrid distributor that connects hardware, software, and cloud services from technology suppliers to resellers and business customers.
Revenue Growth
A company’s long-term performance is an indicator of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years.
With $3.02 billion in revenue over the past 12 months, ScanSource is a mid-sized business services company, which sometimes brings disadvantages compared to larger competitors benefiting from better economies of scale.
As you can see below, ScanSource struggled to increase demand as its $3.02 billion of sales for the trailing 12 months was close to its revenue five years ago. This shows demand was soft, a tough starting point for our analysis.
Long-term growth is the most important, but within business services, a half-decade historical view may miss new innovations or demand cycles. ScanSource’s recent performance shows its demand remained suppressed as its revenue has declined by 8.6% annually over the last two years. 
This quarter, ScanSource’s revenue grew by 2.5% year on year to $766.5 million, falling short of Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to grow 6.5% over the next 12 months, an improvement versus the last two years. This projection is above the sector average and indicates its newer products and services will spur better top-line performance.
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Operating Margin
ScanSource’s operating margin might fluctuated slightly over the last 12 months but has generally stayed the same, averaging 3.2% over the last five years. This profitability was lousy for a business services business and caused by its suboptimal cost structure.
Looking at the trend in its profitability, ScanSource’s operating margin might fluctuated slightly but has generally stayed the same over the last five years, meaning it will take a fundamental shift in the business model to change.
In Q4, ScanSource generated an operating margin profit margin of 2.3%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.
Earnings Per Share
Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.
ScanSource’s EPS grew at an astounding 18.1% compounded annual growth rate over the last five years, higher than its flat revenue. However, this alone doesn’t tell us much about its business quality because its operating margin didn’t improve.
Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.
For ScanSource, its two-year annual EPS growth of 6.3% was lower than its five-year trend. We hope its growth can accelerate in the future.
In Q4, ScanSource reported adjusted EPS of $0.80, down from $0.85 in the same quarter last year. This print missed analysts’ estimates, but we care more about long-term adjusted EPS growth than short-term movements. Over the next 12 months, Wall Street expects ScanSource’s full-year EPS of $3.74 to grow 18.9%.
Key Takeaways from ScanSource’s Q4 Results
We struggled to find many positives in these results. Its full-year revenue guidance missed and its revenue fell short of Wall Street’s estimates. Overall, this was a softer quarter. The stock traded down 3.1% to $42.96 immediately after reporting.
ScanSource may have had a tough quarter, but does that actually create an opportunity to invest right now? What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here (it’s free).
