Avnet (AVT) Q4 FY26 earnings call: guidance and Q&A

Can you elaborate on pricing dynamics, especially memory pricing's impact on the Q1 FY27 guide and the EBIT impact from memory pricing in Q4 FY26? Are other commodities seeing price increases?

Management confirmed broader price increases beyond memory, though more modest. Memory pricing contributed about one-third of GP dollar growth, similar to its sales impact. The Q1 guide assumes modest price increases. They pass pricing through to customers, gaining ASP and GP dollar upside, but not necessarily percentage margin. Some deflation is also occurring in other parts of the portfolio.

“I would say then the guide assumed modest or minor price increases going into next quarter, we'll continue to monitor the situation and give clarity there. From a -- how much the impact EBIT or operating income we would say about 1/3 of that GP dollar growth also came from pricing.”

asked by Joseph Quatrochi · answered by Ken Jacobson

You mentioned over 50% of inventory increase was pricing-related. Can you discuss the unit increase of inventory and the outlook for unit inventory in FY27?

About half of the inventory increase was due to memory pricing. While more units are needed for higher volumes, inventory is turning faster. EC inventory days are expected to continue improving. Inventory is healthy, and the company is making necessary investments to capture growth opportunities, especially as lead times extend.

“Yes, that's right. About half of the increase came from pricing specifically in memory. And again, some of that's just timing differences, right, in terms of when we got product and things of that nature. I think, in general, you're going to need more units to support the higher volumes, but we're turning it faster.”

asked by Joseph Quatrochi · answered by Ken Jacobson

Given the strong revenue growth (47% YoY) and multiple quarters of expansion, what inning of the cycle would you say Avnet is in?

Phil Gallagher suggested the company is in the 'third or fourth inning' of the cycle, or the 'front one-third of the baseball game,' indicating significant runway for continued growth based on backlog and book-to-bills.

“I'd say we're end of the spire you talk to, but for most part or the customers, it feels like maybe in the third or fourth inning, maybe something on those lines are going to put it in baseball terms. For sure, not the eighth inning. So I probably say front 1/3 of the baseball game to third within [indiscernible].”

asked by William Stein · answered by Philip Gallagher

How should we think about gross and operating margin expansion over the next few quarters, especially given the historical target of 5%+ operating margin?

Management expects continued steady progress in operating margin expansion, similar to the past four quarters. Farnell's gross margins are expected to see modest uptick due to a higher mix of on-the-board components. For EC, gross margin expansion depends on regional mix, with strong Asia growth potentially tempering overall gross margin percentage, but the target of 5%+ operating margin remains.

“Well, I guess the short answer to your question would be continued steady progress. I think if you look at the past 4 quarters, 30 basis points this quarter was about 60 basis points expansion, specifically on EC.”

asked by William Stein · answered by Ken Jacobson

Americas revenue grew 28% sequentially, faster than other regions. What factors drove this, and how much was from memory and data center?

Americas growth was diverse across verticals, not primarily data center (which is a smaller portion of their business). Industrial and defense led the way, with Aerospace & Defense up almost 40% YoY. Transportation and even consumer saw increases. The growth is attributed to market diversification and content increases, with AI-related ecosystem driving industrial demand. Memory pricing benefited all regions, not just Americas.

“So it's just a diversification of the market and really the industrial and defense leading the way from a revenue standpoint and a growth standpoint, which makes sense. Unfortunately, in defense area with what's going on in the world, and we have a strong position there with a dedicated business unit for that vertical.”

asked by Ruplu Bhattacharya · answered by Philip Gallagher

How much of the $9B-$9.3B revenue guide is from memory pricing versus unit volumes? Is there evidence of real consumption versus precautionary buying or double ordering, and any risk of demand destruction?

The guide is primarily driven by unit volumes and increased ASP mix from higher-value products, with modest price increases being minor. Management believes current demand is closer to true consumption, not significant safety stock or double ordering, as inventory is being consumed quickly and lead times are extending. They monitor for inflated demand and cancellation rates, seeing nothing abnormal currently. No demand destruction is observed.

“This is really units. And by the way, increased ASP mix, right? So we have higher ASP products that are going through our volumes as well. So that's part of the equation. But again, you mentioned it backlog, strong book-to-bill well above parity, when we're seeing volumes move.”

asked by Ruplu Bhattacharya · answered by Ken Jacobson