Insight Enterprises (NSIT) Q3 2025: Cloud Gross Profit Jumps 7% as AI-First Strategy Accelerates

October 30, 2025 | By EarningsIQ Research

Insight Enterprises delivered a complex Q3 marked by a 7% increase in cloud gross profit and record gross margin, despite persistent headwinds in hardware and core services. The company’s pivot toward AI and outcome-based solutions is reshaping its business model, with recent acquisitions aimed at scaling data and cybersecurity capabilities. Capital allocation remains balanced, but the CEO transition and ongoing macro uncertainty set the stage for a critical inflection as Insight positions for 2026.

Summary

  • AI Solutions Drive Strategic Shift: Insight’s transition to AI-first services is reshaping client engagement and delivery models.
  • Capital Deployment Prioritizes Growth Capabilities: Recent acquisitions expand data and security offerings, balancing near-term dilution with long-term value creation.
  • Macro Uncertainty and Leadership Transition Loom: Persistent delays in large enterprise spending and an upcoming CEO search add complexity to the outlook.

Performance Analysis

Insight’s Q3 top-line declined 4%, with commercial client revenue up 5% offset by continued weakness in large enterprise and corporate segments. Hardware revenue saw modest growth, up 1% for the third straight quarter, but hardware gross profit fell 5% due to pricing and mix pressures, especially in EMEA (Europe, Middle East, Africa). Core services gross profit dropped 3%, reflecting subdued large enterprise demand and delayed project launches.

Cloud gross profit was the standout, rising 7% and outperforming internal expectations, driven by double-digit gains in SaaS and infrastructure-as-a-service—even as partner program changes continued to weigh on results. Gross margin reached a record 21.7%, supported by disciplined SG&A (selling, general, and administrative) management, which kept adjusted expenses in check. The company generated $249 million in operating cash flow, enabling $75 million in share repurchases and maintaining ample liquidity for further investment.

  • Cloud Outperformance: Underlying cloud growth (excluding partner headwinds) continued in the high teens, positioning cloud as the leading growth vector for 2026.
  • Hardware and Services Drag: Hardware and core services underperformed, with large enterprise clients delaying spend amid budget reprioritization and AI-driven uncertainty.
  • Expense Discipline Supports Bottom Line: Adjusted earnings per share rose 11% as expense controls offset gross profit shortfalls.

Overall, the quarter reflected a business in transition—balancing near-term headwinds with foundational investments in AI and security to drive future growth.

Executive Commentary

"Our influence with partners and clients continues to expand...Cloud gross profit increased 7% and was ahead of our expectations, driven by double digit growth in SaaS and infrastructure as a service. This performance was partially offset by the partner program changes we've previously discussed. As we exit 2025, we believe this impact will be largely behind us."

Joyce Mullen, President and Chief Executive Officer

"Our Q3 results were mixed, with services and hardware performing below expectations, partially offset by outperformance in cloud. Combined with disciplined SG&A management, we drove a 5% increase in adjusted earnings from operations and an 11% increase in adjusted earnings per share."

James Morgado, Chief Financial Officer

Strategic Positioning

1. AI-First Solutions Integrator Model

Insight is aggressively repositioning itself as an AI-first solutions integrator, investing in dedicated AI sales resources, proprietary intellectual property, and outcome-based delivery frameworks. This shift is designed to move clients from experimentation to production AI deployments, leveraging Insight’s strengths in hyperscaler platforms, security, and data consulting. The upcoming launch of branded Insight AI offerings will formalize this pivot and provide reference use cases for clients.

2. Capital Allocation and Acquisitions

Two major acquisitions—Inspire 11 (data and AI consultancy) and Securo (cybersecurity)—signal a clear commitment to scaling growth capabilities, even at the expense of near-term EPS (earnings per share) dilution. Leadership views these moves as essential to winning in outcome-based, AI-driven projects, with Inspire 11’s outcome-centric consulting and Securo’s proven security IP both expected to be EBITDA-accretive immediately and EPS-accretive within four quarters. Share repurchases continued in parallel, reflecting a balanced capital allocation approach.

3. Services Methodology and Scalability

Leadership is implementing a more disciplined, repeatable methodology for services delivery, aiming to decouple revenue growth from traditional time-and-materials models. The adoption of standardized frameworks (such as “radius” for AI assessments and “dev shop” for optimization) is intended to drive consistency, speed to value, and cross-sell opportunities. This operational overhaul is modeled after successful smaller acquisitions and is expected to improve margin and scalability as AI adoption rises.

4. Partner Ecosystem and Industry Recognition

Insight’s partner ecosystem underpins its solutions strategy, with recent recognition from Gartner, IDC, Apple, and CrowdStrike validating its positioning in public cloud, generative AI, and device services. These relationships enhance Insight’s ability to deliver integrated solutions and respond to evolving client needs in AI and security.

5. Leadership Transition and Strategic Continuity

CEO Joyce Mullen’s announced retirement and the launch of a public CEO search introduce an element of uncertainty. However, the board’s stated commitment to an orderly transition and the continuity of the AI-first strategy are intended to maintain momentum during this pivotal period.

Key Considerations

Q3 marked a turning point as Insight doubled down on AI and security, even as legacy revenue streams faced pressure and macro uncertainty persisted. The company’s ability to execute on its transformation, integrate acquisitions, and navigate a leadership transition will be critical to delivering on its long-term ambitions.

Key Considerations:

  • Cloud as Primary Growth Driver: Underlying cloud growth remains robust and is set to lead company expansion as partner headwinds abate.
  • AI and Security Expansion: Recent M&A activity directly targets high-growth segments, but integration and realization of synergies will be a near-term focus.
  • Expense Management Offsets Revenue Headwinds: Prudent SG&A control is supporting profitability despite top-line challenges in hardware and services.
  • Large Enterprise Hesitancy Remains: Delayed decision-making and budget reprioritization among large clients are suppressing near-term project volume.
  • Leadership Transition Adds Complexity: CEO search comes as Insight seeks to accelerate its AI-first transformation, raising the stakes for execution continuity.

Risks

Persistent macro uncertainty is delaying large enterprise IT projects and hardware refresh cycles, with clients reprioritizing budgets toward cloud and AI while deferring traditional spend. The CEO transition introduces additional execution risk, while the integration of recent acquisitions must deliver promised growth and synergy. Ongoing partner program changes and potential interest rate or debt management challenges could further pressure results.

Forward Outlook

For Q4, Insight guided to:

  • Modest improvement in large client demand and hardware gross profit
  • Cloud gross profit expected to be flat to slightly up for the year
  • Core services returning to growth in Q4, with full-year core services gross profit approximately flat

For full-year 2025, management maintained guidance:

  • Gross profit slightly down from 2024, gross margin around 21%
  • Adjusted diluted EPS of $9.60 to $9.90, reflecting acquisition-related interest expense

Management highlighted continued macro caution, normalization of cloud partner headwinds by year-end, and the expectation that recent acquisitions will be EBITDA-accretive immediately and EPS-accretive within four quarters.

Takeaways

Insight’s Q3 underscores a strategic pivot toward AI and high-value services, with cloud performance and disciplined cost management balancing legacy headwinds. The company’s capital deployment into data and security capabilities positions it for future relevance, but execution risk is elevated amid leadership change and persistent client hesitancy.

  • Cloud and AI Drive Future Growth: Underlying cloud momentum and new AI offerings are set to lead revenue expansion as legacy headwinds subside.
  • Balanced Capital Allocation, But Integration Critical: Acquisitions and buybacks reflect a dual-pronged strategy, but success hinges on seamless integration and synergy realization.
  • Execution and Leadership in Focus: Investors should monitor the CEO transition, large enterprise demand signals, and the ramp of new services for evidence of sustainable transformation.

Conclusion

Insight Enterprises is at a strategic crossroads—leveraging AI investments and acquisitions to offset near-term headwinds and reposition for long-term growth. The coming quarters will test the company’s ability to integrate new capabilities, maintain operational discipline, and deliver on its AI-first promise amid leadership transition and macro uncertainty.

Industry Read-Through

Insight’s experience highlights the broader IT services industry’s shift from traditional hardware and on-premise software toward cloud, AI, and outcome-based consulting. The persistent delays in large enterprise spending and the need for disciplined, repeatable service delivery are themes echoed across the sector. Competitors will face similar pressures to scale data, AI, and security expertise—while managing cost and navigating client budget uncertainty—making Insight’s playbook a relevant case study for IT consultancies globally.

NSIT Technology IT Services Cloud AI Cybersecurity Acquisitions