Avnet NASDAQ: AVT reported third-quarter fiscal 2026 results that topped management’s guidance, as improving demand conditions and price increases in certain components helped drive record sales in its Electronic Components business and continued margin recovery in Farnell.
Quarterly results exceeded guidance on strong regional growth
CFO Ken Jacobson said third-quarter sales were approximately $7.1 billion, “above the high end of our guidance range,” up 34% year-over-year and up 13% sequentially. By region, sales increased 39% year-over-year in Asia, 31% in Europe, and 27% in the Americas. Asia represented 49% of total sales, up from about 47% a year earlier.
CEO Phil Gallagher called it an “outstanding quarter,” citing “strong execution by our teams around the world and improving market conditions.” Gallagher said Avnet saw “broad-based demand across most of our core end markets,” including data center, industrial, aerospace and defense, transportation, consumer, and networking, with the quarter led by industrial, networking, and data center.
On profitability, Jacobson reported adjusted operating income of $221 million and a total adjusted operating margin of 3.1%, nearly 40 basis points higher than the prior quarter. Adjusted diluted EPS was $1.48, which Jacobson said exceeded the high end of Avnet’s guidance.
Electronic Components posts record sales as lead times extend
Gallagher said Avnet delivered “record sales in our Electronic Components business,” supported by demand creation activity and continued conversion of design wins into revenue. He added that the Interconnect, Passive, and Electromechanical (IP&E) business outperformed, reflecting Avnet’s “technical capabilities” and “total solution selling.”
In Asia, Gallagher said sales reached a record $3.5 billion in a quarter that is “usually impacted by the Lunar New Year holiday,” marking the seventh consecutive quarter of year-over-year growth in the region. In Europe (EMEA), he said Avnet saw sequential and year-over-year growth for the second consecutive quarter, though demand remained “mixed.” In the Americas, sales rose sequentially and year-over-year for a third straight quarter, and Gallagher said IP&E in the region posted a record quarter, growing 25% year-over-year.
Gallagher also highlighted tightening supply dynamics. Over the last 90 days, he said component lead times have increased in more than half of the product categories the company tracks, spanning semiconductors and IP&E, with the remainder stable. While lead-time extensions have continued in components supporting data center and AI builds, he said they are spreading to a “broader set of products” across end markets. Gallagher said backlog is growing and book-to-bill ratios are “well above parity in all regions.”
Memory pricing drove a meaningful portion of sales growth
Management emphasized that price increases—most notably in memory—were a significant contributor to reported revenue growth. Jacobson said about half of Avnet’s sequential sales growth and roughly one quarter of year-over-year sales growth was attributable to higher memory pricing. He noted Avnet passes component price increases through to customers, which can lift gross profit dollars but typically has “less of an impact on gross profit margin.”
Gross margin for the quarter was 10.4%, down 68 basis points year-over-year and slightly lower sequentially. Jacobson attributed year-over-year pressure in Electronic Components gross margin largely to a higher mix of Asia revenue and differences in product and customer mix in western regions. Farnell’s gross margin improved, rising 34 basis points year-over-year and 49 basis points sequentially, helped by an “expected improvement in product mix of on-the-board components,” Jacobson said.
During the Q&A, Gallagher told analysts that outside of memory, Avnet did not have “a whole lot to calculate” regarding how much growth was driven by average selling price changes in other technologies during the quarter, adding, “Effectively, the bulk was memory.” Jacobson added that other price increases are not expected to approach memory’s magnitude.
Asked about potential double-ordering and stockouts, Gallagher said Avnet is disciplined in monitoring for inflated demand signals. He said stockouts were “mostly memory right now,” while IP&E lead times have “gone out a bit” but not to stockout levels. He also cited modest lead-time changes in discrete and analog components and linked storage lead-time increases to memory.
Farnell recovery continues; margin expansion targets reiterated
Avnet’s Farnell segment continued to improve. Gallagher said Farnell posted double-digit year-over-year sales growth for the third consecutive quarter, with gross margin and operating margin expansion “in line with expectations.” Jacobson reported Farnell sales increased 24% year-over-year and 6% sequentially (18% year-over-year in constant currency). Farnell operating income was $24 million and operating margin was 5.2%, up 55 basis points sequentially and the highest level in three years, according to Jacobson.
Management reiterated longer-term margin goals for Farnell. Jacobson said the company expects to continue driving operating margin expansion with a near-term goal of returning to double-digit operating margins by the second half of calendar 2027. In response to analyst questions, he said the company’s view on quarterly improvement—previously described as 50 to 100 basis points per quarter—was “not changing.”
Inventory metrics improved; leverage reduction and capital returns remain priorities
Avnet reported improved inventory and working capital efficiency metrics. Jacobson said working capital days decreased 11 days quarter-over-quarter to 76 days. Inventory rose $168 million sequentially, but inventory net of accounts payable fell $115 million versus the prior quarter. Avnet ended the quarter with 77 days of inventory—below its near-term target of 80 days—earlier than expected. Electronic Components inventory was 70 days, while Farnell’s was just over 200 days.
Gallagher emphasized inventory’s strategic importance for a distributor, saying it is the company’s “lifeblood,” while also noting the need to avoid excess and aging inventory. He said Avnet added over 50,000 SKUs last year and “another 70,000 additional SKUs” this year, with much of the expansion in IP&E.
On the balance sheet, Jacobson said gross leverage ended the quarter at 3.6x, down from 3.9x in the second quarter, with about $1.7 billion of available committed borrowing capacity. He said the company believes it is on track to reduce leverage to roughly 3x by the end of the calendar year. Avnet paid a quarterly dividend of $0.35 per share, or $29 million, and Jacobson said year-to-date shareholder returns totaled $224 million, including dividends and share repurchases. The company has $226 million remaining on its share repurchase authorization, and Jacobson said Avnet expects to repurchase shares once leverage returns to targeted levels.
Fourth-quarter outlook: Jacobson guided for fiscal fourth-quarter sales of $7.3 billion to $7.6 billion and diluted EPS of $1.70 to $1.80, assuming current market conditions persist. The midpoint implies roughly 5% sequential sales growth, with growth expected across all Electronic Components regions.
About Avnet NASDAQ: AVT
Avnet, Inc NASDAQ: AVT is a global technology distributor and solutions provider specializing in the sourcing, design, and supply chain management of electronic components and embedded systems. The company offers a broad portfolio of semiconductors, interconnect, passive and electromechanical components, as well as embedded hardware and software, cloud solutions, and Internet of Things (IoT) services. Avnet's offerings aim to support customers through every stage of the product lifecycle, from initial prototype and design to production and end-of-life management.
Founded in 1921 by Charles Avnet, the company has evolved from a regional radio parts supplier into a multinational enterprise.
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