Can you quantify the contribution of industrial, networking, and data center markets to overall components revenue?

Industrial contributes roughly 30-plus percent of the components revenue. Data center is estimated to be in the 10-15% range directly, with additional indirect lift seen in other verticals like industrial due to data center expansion. “So industrial is in the 30-plus percent right there. We've been that way. Historically, it's coming back pretty strong, actually, year-on-year. So that's roughly the numbers.”

What is Avnet's exposure to the AI data center end market, and is it traditional component distribution or supply chain services?

Direct exposure to data centers is estimated to be 10-15% of revenue, up from 5-7% a couple of quarters ago. This is primarily traditional component distribution, tied to core product lines, and largely involves selling into hyperscalers in Asia. The company also sees an 'n-minus-one factor' where other verticals like industrial are impacted by data center expansion, which is Avnet's sweet spot. “Yes. So I think we estimated a couple of quarters ago is somewhere in the 5% to 7% range, probably increased a little bit closer to 10% to 15% that we have exposure. And to be clear to your question, to go directly into the data center. And that would be, I don't know what you call it traditional anymore, but it's definitely tied to supply chain, it's more in the core and traditional product lines.”

Why did Electronic Components grow faster than Farnell, especially given Farnell's potential for acceleration in an upturn?

Farnell has already had three quarters of double-digit year-on-year growth, getting a head start. A lesser percentage of Farnell's business is on-board components (due to MRO and test & measurement), making it less directly impacted by component-specific upturns. Farnell's strongest region, Europe, is still more mixed in its recovery compared to Asia, which impacts its overall growth. Farnell also has less exposure to memory pricing increases. “The other thing is they have a lesser percentage of their business is on board components, right? So their percentages are lower because of the MRO test and measurements. A big part of their business. So it's not all apples-to-apples, like everything we have. They're not 90% on board to or 90% sevelectorn IP like we are in the core.”

AVT

Avnet (AVT) Q3 FY26 earnings call: guidance and Q&A

Earnings call· Mar 2026 (Q3 FY26)· Information Technology· Apr 29, 2026

Source: earnings call transcript

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

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

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

Category	Target	Timeline	Confidence
Q4 FY26 Sales	$7.3 billion to $7.6 billion high materiality	Q4 · FY26	High
Q4 FY26 Diluted Earnings Per Share	$1.70 to $1.80 high materiality	Q4 · FY26	High
SG&A expenses as a percentage of gross profit dollars	mid-60s percentage-wise medium materiality	Next year	Medium
Electronic Components operating margin	4% near-term goal medium materiality	Within the next fiscal year	Medium
Farnell operating margin	double-digit operating margin medium materiality	Second half of calendar 2027 · CY27	Medium
Return on working capital	16% medium materiality	Second half of fiscal 2027 · FY27	Medium
Gross leverage	approximately 3x high materiality	End of the calendar year · CY26	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
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	$6.86B	35%	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.	$240M	24%	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%	$3.5B	39%	—	—
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%	—	—

Orderbook & backlog

Book-to-bill ratio well above parity Q3 FY26

Applies to all regions.

Risks & headwinds

Geopolitical environment and macroeconomic impact Near-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 times Ongoing

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 suppliers Next 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

Electronic Components operating margin

within the next fiscal year

Current 3.5%

Target progress 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.

Find out whether AVT delivers this. Inve re-checks your case every morning.

Q&A highlights

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 read 6 chapters

Detailed narrative

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.

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.

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.

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.

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.

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.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.