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    AVT
    Earnings call· Mar 2026(Q3 FY26)

    AVNET Q3 FY26 earnings call AVT

    Apr 29, 2026 Source

    Executive summary

    Avnet Q3 FY26 — Record Sales and Operating Margin Expansion Driven by Improving Market Conditions

    Avnet delivered an outstanding quarter, driven by strong execution and improving market conditions, particularly in data center and AI demand. The company achieved record sales and expanded operating margins, with significant growth in Asia and a continued rebound in Europe and the Americas. Management is focused on disciplined expense management, inventory optimization, and capital allocation, while monitoring geopolitical risks and lead time extensions.

    Highlights

    5

    • Record sales of $7.1 billion, up 34% year-over-year, exceeding guidance.

    • Electronic Components business achieved record sales, with 35% year-over-year growth.

    • Adjusted operating margin expanded to 3.1%, an increase of nearly 40 basis points sequentially.

    • Inventory days reduced to 77 days, achieving the near-term target of below 80 days earlier than anticipated.

    • Farnell sales grew double digits year-on-year for the third consecutive quarter, with operating margin reaching 5.2%.

    Concerns

    4

    • Gross profit margin of 10.4% was down 68 basis points year-over-year, primarily due to higher percentage of sales from Asia and product/customer mix.

    • Sequential increase in SG&A expenses of $27 million, partly due to foreign currency impact of $3 million.

    • Working capital increased by $145 million sequentially, primarily due to an increase in accounts receivable.

    • Cash flow from operations was a use of $54 million to support sequential sales growth.

    Guidance & targets

    7
    CategoryTargetConfidence
    Q4 FY26 Sales
    $7.3 billion to $7.6 billion
    high materiality
    High
    Q4 FY26 Diluted Earnings Per Share
    $1.70 to $1.80
    high materiality
    High
    SG&A expenses as a percentage of gross profit dollars
    mid-60s percentage-wise
    medium materiality
    Medium
    Electronic Components operating margin
    4% near-term goal
    medium materiality
    Medium
    Farnell operating margin
    double-digit operating margin
    medium materiality
    Medium
    Return on working capital
    16%
    medium materiality
    Medium
    Gross leverage
    approximately 3x
    high materiality
    High

    Segment performance

    5
    SegmentRevenueYoYQoQMargin
    Electronic Components
    Achieved record sales driven by growth across all regions and strong execution. Demand creation activity remained robust, and design wins converted to sales. The IP&E business outperformed, reflecting technical capabilities and focus on total solution selling. Operating margin increased by nearly 40 basis points sequentially.
    Demand creation revenue: 16% sequential increaseIP&E business growth: 25% year-on-year
    		$6.86B35%13%3.5%
    Farnell
    Showed steady progress and recovery, with double-digit year-on-year sales growth for the third consecutive quarter. Gross margins and operating margins expanded in line with expectations, reaching its highest operating margin in 3 years. This is Farnell's sixth consecutive quarter of operating margin expansion.
    		$240M24%6%5.2%
    Asia (Electronic Components)
    Reached another record high in sales, marking the seventh consecutive quarter of year-on-year sales growth. Demand increased across all geographies and verticals, led by data center, industrial, and networking markets.
    Percentage of total sales: 49%
    		$3.5B39%——
    EMEA (Electronic Components)
    Experienced continued rebound with sales growth both sequentially and year-on-year for the second consecutive quarter. Growth was seen across industrial, networking, and early signs in aerospace and defense. Market conditions are improving, though still mixed.
    		—31%——
    Americas (Electronic Components)
    Sales grew both sequentially and year-over-year, marking the third consecutive quarter of year-on-year growth. Most end markets showed sequential growth led by networking, while aerospace and defense, networking, and industrial were the strongest year-over-year.
    		—27%——

    Operational metrics

    24
    Non-GAAP operating margin
    3.1%up nearly 40 bps sequentially
    Q3 FY26

    Represents the third consecutive quarter of adjusted operating income margin expansion.

    Non-GAAP EPS
    $1.48exceeded high end of guidance
    Q3 FY26

    Adjusted diluted earnings per share grew more than 3x sales compared to last quarter.

    Gross profit margin
    10.4%down 68 bps YoY
    Q3 FY26

    Slightly lower sequentially, primarily due to higher percentage of sales from Asia and product/customer mix in Western regions.

    SG&A expenses
    $519Mup $83M YoY, up $27M sequentially
    Q3 FY26

    Sequential increase primarily from higher sales volumes, incentive compensation, and foreign currency.

    SG&A expenses as percentage of gross profit dollars
    70%lower sequentially from 74%
    Q3 FY26

    Reflects disciplined expense management.

    Interest expense
    $63Mconsistent with expectations
    Q3 FY26

    Consistent with expectations.

    Adjusted effective income tax rate
    23%consistent with expectations
    Q3 FY26

    Consistent with expectations.

    Working capital
    $145M increasesequentially
    Q3 FY26

    Primarily due to an increase in accounts receivable driven by sales growth.

    Working capital days
    76 daysdecreased 11 days QoQ
    Q3 FY26

    Achieved near-term target of below 80 days earlier than anticipated.

    Inventory
    $168M increase3% sequentially
    Q3 FY26

    Primarily driven by an increase in certain memory products to support supply chain services and overall increase in inventory received at quarter-end.

    Inventory days
    77 days
    Q3 FY26

    Achieving near-term target of below 80 days earlier than anticipated.

    Inventory days
    70 days
    Q3 FY26

    Specific inventory days for the Electronic Components business.

    Inventory days
    just over 200 days
    Q3 FY26

    Specific inventory days for the Farnell business.

    Return on working capital
    improved over 300 bpssequentially
    Q3 FY26

    From both higher operating income and reduction in working capital days.

    Capex
    $17M
    Q3 FY26

    Cash used for capital expenditures during the quarter.

    Gross leverage
    3.6xdown from 3.9x in Q2
    Q3 FY26

    Ended the quarter with approximately $1.7 billion of available committed borrowing capacity.

    Dividend per share
    $0.35
    Q3 FY26

    Quarterly dividend paid.

    Total dividends paid
    $29M
    Q3 FY26

    Total dividend payment for the quarter.

    Shareholder return year-to-date
    $224M
    YTD Q3 FY26

    Includes both dividends and share repurchases.

    Share repurchase authorization remaining
    $226M
    Q3 FY26

    Remaining on existing share repurchase authorization.

    Sales growth attributable to memory pricing
    approximately halfsequential sales growth
    Q3 FY26

    Memory pricing contributed significantly to sequential sales growth.

    Sales growth attributable to memory pricing
    approximately 1/4year-over-year sales growth
    Q3 FY26

    Memory pricing contributed significantly to year-over-year sales growth.

    Memory as percentage of revenue
    low double-digit range
    Q3 FY26

    Primarily a core EC business comment, Farnell has much smaller concentration.

    SKUs added
    over 130,000
    FY26 YTD

    Added across IP&E and semiconductor categories to improve inventory breadth.

    Industry KPIs

    7
    MetricValueDetails
    Orders book to billwell above parity
    Segment revenue growthElectronic Components: $6.86B; Farnell: $240MUSD
    Design wins product cycle rampsRobust
    Order visibility backlog policyGrowing backlog
    Supply demand imbalance lead timesLead time extensions
    End market revenue mix organic growthIndustrial: 30%+; Data Center: 10-15%%
    Operating margin incremental leverage3.1%%

    Orderbook & backlog

    1
    Book-to-bill ratiowell above parityQ3 FY26

    Applies to all regions.

    Risks & headwinds

    3
    Geopolitical environment and macroeconomic impactNear-term

    No material impact on Q3 results outside of some increases in freight expenses due to rising fuel costs.

    Mitigation: Closely monitoring the situation and remaining mindful of potential broader macroeconomic impact.

    Increasing lead timesOngoing

    Lead time extensions in over 50% of product categories tracked (semiconductors, interconnect, passive, electromechanical).

    Mitigation: Customers are turning to Avnet's expertise to manage component supply chains; backlog is growing.

    Price increases from suppliersNext several months

    Price increases across a few suppliers and technologies, most predominantly related to memory, contributing to sales growth.

    Mitigation: Pass-through of price increases to customers; majority driven by increases in underlying input costs.

    What to watch in Q4 FY26

    5

    Electronic Components operating margin

    within the next fiscal year
    Current3.5%
    Targetprogress towards 4%

    Why it matters

    Indicates the pace of recovery and operational efficiency in the core business.

    we currently expect our EC operating margin to reach our 4% near-term goal within the next fiscal year.

    Q&A highlights

    8

    How much of the revenue growth, outside of memory, was driven by higher ASPs versus volume growth? Are there any areas seeing stock-outs or double ordering?

    Memory pricing was the bulk of the ASP impact this quarter, contributing significantly to sequential and year-over-year growth. Other price increases are expected to be less significant. No stock-outs are currently observed outside of memory, but lead times are extending across IP&E, discretes, and analog. Double ordering is difficult to track directly but the company monitors inflated demand forecasts.

    “Not -- not -- I mean, the memory -- we just wanted to be fully transparent on that because it's frankly so public right now. I know you have a question on that. a lot of them are sort I think more of the price increase will start to come into play this quarter as April 1. So we didn't have a whole lot to calculate as far as a percentage of growth based on ASPs and the balance of the technologies.”

    asked by Melissa Dailey Fairbanks · answered by Philip Gallagher

    2 min read6 chapters

    Detailed Narrative

    01

    Strong Market Recovery and Demand Trends

    Avnet reported an outstanding quarter, exceeding guidance with record sales driven by improving market conditions. The company observed broad-based demand across most core end markets, including data center, industrial, aerospace and defense, transportation, consumer, and networking. Strongest demand was noted in industrial, networking, and data center, with data center leading year-over-year improvement across verticals. This recovery is positioning Avnet well for the beginning of an up cycle.

    02

    Lead Time Extensions and Pricing Increases

    The lead time environment has shifted, with extensions observed in over 50% of tracked product categories, including semiconductors, interconnect, passive, and electromechanical components. While initially concentrated in data center and AI builds, these extensions are now spreading to broader applications. The company also noted price increases, predominantly in memory, which contributed approximately half of sequential sales growth and a quarter of year-over-year growth. Management expects additional price increases driven by underlying input costs.

    03

    Regional Performance Highlights

    Asia achieved another record high in sales at $3.5 billion, representing almost 50% of total sales and marking the seventh consecutive quarter of year-on-year growth. EMEA saw continued rebound with sequential and year-on-year sales growth for the second consecutive quarter, driven by industrial, networking, and early signs in aerospace and defense. The Americas also grew sequentially and year-over-year for the third consecutive quarter, led by networking, aerospace and defense, and industrial.

    04

    IP&E Business Outperformance

    Avnet's Interconnect, Passive, and Electromechanical (IP&E) business had a record quarter, growing 25% year-on-year. This outperformance reflects the benefits of the company's technical capabilities and focus on total solution selling. Management highlighted the multiplier effect, as every active semiconductor chip requires surrounding IP&E components to function, driving success in providing full solutions with both semiconductor and IP&E offerings.

    05

    Farnell's Continued Recovery and Strategic Investments

    Farnell demonstrated steady progress, with double-digit year-on-year sales growth for the third consecutive quarter and expanding gross and operating margins. The business remains on track to achieve double-digit operating margins by the second half of calendar 2027. Farnell's continued investment in its e-commerce platform, customer experience, and inventory proposition, along with leveraging Avnet's scale, is differentiating its value proposition.

    06

    Inventory Management and Working Capital Efficiency

    Avnet successfully reduced inventory days to 77, achieving its near-term target of below 80 days earlier than anticipated. While inventory increased sequentially by $168 million to support supply chain services and overall demand, inventory net of accounts payable decreased by $115 million. The company emphasized that inventory is a critical enabler and they remain focused on making necessary investments to capture market opportunities while improving return on working capital.

    AI-generated summary of the company’s earnings call. Not investment advice.