Avnet NASDAQ: AVT reported record fourth-quarter fiscal 2026 sales and adjusted earnings, citing broad-based demand improvement across regions and end markets, higher component pricing and operating leverage. The company also issued first-quarter fiscal 2027 guidance calling for additional sales and earnings growth.
Fourth-quarter sales reached a record $8.3 billion, up 48% from a year earlier and 17% sequentially, Chief Financial Officer Ken Jacobson said. Adjusted diluted earnings per share rose to a quarterly record of $2.28, while adjusted operating income totaled $318 million and the adjusted operating margin reached 3.8%.
“It was a record quarter for Avnet that exceeded our sales and EPS guidance,” Chief Executive Officer Phil Gallagher said. He said results were supported by improving demand in the company’s core markets, execution by its teams and margin expansion from operating leverage.
Growth Across Regions and Businesses
Sales grew year over year in all three major regions, increasing 55% in the Americas, 46% in Asia and 44% in EMEA. Asia represented 47% of total company sales during the quarter.
Avnet’s Electronic Components business posted record sales, with revenue up 49% year over year and 17% sequentially. All three regions reported double-digit year-over-year and sequential growth in the segment. The Americas recorded its fourth consecutive quarter of year-over-year growth, while Asia reached $3.9 billion in sales and its eighth consecutive quarter of year-over-year growth, Gallagher said.
In the Americas, Gallagher said growth was diversified across verticals rather than concentrated in data center activity. Aerospace and defense revenue rose roughly 40% to 45% year over year, while industrial, communications, transportation and consumer markets also increased. In Asia, demand was led by data center, transportation, networking and industrial markets. EMEA posted growth for a third consecutive quarter, aided by data center and industrial demand, though transportation growth was slower.
Farnell also delivered record sales, which rose 29% year over year and 10% sequentially. Its operating income was $45 million and operating margin reached 9%, up nearly 400 basis points from the prior quarter. Jacobson said this was Farnell’s highest operating margin in more than three years and its seventh consecutive quarter of margin expansion.
Farnell’s gross margin rose nearly 400 basis points year over year and more than 200 basis points sequentially, primarily because of a better mix of higher-margin on-the-board components. The company said Farnell remains on track to reach double-digit operating margins before the end of fiscal 2027.
Pricing, Supply Conditions and Demand
Memory pricing accounted for approximately one-third of both the sequential and year-over-year sales growth in the fourth quarter, Jacobson said. He added that pricing increases also contributed about one-third of gross-profit-dollar growth, with no meaningful difference between pricing’s impact on sales and gross profit dollars.
Gallagher said price increases were beginning to broaden beyond memory into other semiconductor and interconnect, passive and electromechanical product categories. However, he said the increases outside memory were more modest, and some parts of the portfolio continued to experience price deflation.
The company’s first-quarter guidance assumes only modest price increases, Jacobson said, with projected growth driven primarily by unit volumes and a mix of higher average selling price products.
Gallagher said supply conditions tightened during the quarter, with lead times extending across most component categories. While AI and data center investment remains an industry catalyst, he said demand has broadened into power management, connectivity, automation and edge-AI applications. He cited robotics, drones and autonomous systems as emerging applications requiring sensing, embedded computing, connectivity, power and thermal-management technologies.
Management said it has not seen evidence of material excess customer inventory or abnormal order cancellations. Customers, particularly larger original equipment manufacturers, are seeking to build safety stock in some cases, Jacobson said, but management believes demand is increasingly tied to consumption. Gallagher said Avnet works with suppliers and customers to identify potential double ordering and challenge unusual forecast increases.
Margins, Inventory and Capital Allocation
Gross profit dollars increased 46% year over year, broadly in line with sales growth. Gross margin was 10.4%, up five basis points sequentially but down 14 basis points from the prior-year period.
Electronic Components’ operating income was $317 million, and its operating margin was 4.1%, up 54 basis points sequentially. Jacobson said it was the segment’s highest operating margin in more than two years. He expects SG&A expense as a percentage of gross profit dollars to improve to below 60% before the end of fiscal 2027, from 63% in the fourth quarter.
Working capital increased $559 million sequentially, largely reflecting higher receivables associated with $1.2 billion of sequential sales growth. Working-capital days declined seven days to 69 days, while inventory days improved to 71 from 77 in the prior quarter. More than half of the $600 million increase in inventory dollars was related to pricing, substantially all of it tied to memory, Jacobson said.
Avnet ended the quarter with gross leverage of 3.2 times, down from 3.6 times in the third quarter, and approximately $1.2 billion in available committed borrowing capacity. The company said it expects to reach its leverage target of approximately three times by the end of the calendar year. During fiscal 2026, Avnet returned $138 million through share repurchases and $114 million in dividends.
First-Quarter Outlook
For the first quarter of fiscal 2027, Avnet forecast sales of $9 billion to $9.3 billion and adjusted diluted EPS of $2.80 to $2.90. At the midpoint, the sales outlook implies approximately 10% sequential growth.
The forecast assumes current market conditions persist, interest expense similar to the fourth quarter, an adjusted tax rate of 21% to 25% and 85 million diluted shares outstanding. Gallagher said book-to-bill ratios in all regions are “solidly above one,” while backlog is healthy and extending into fiscal 2027.
Asked about the stage of the market cycle, Gallagher described the company as likely in the “third or fourth inning,” adding that the environment does not appear to be near its end. He said December-quarter demand was currently looking healthy, potentially better than seasonal patterns, though he did not provide guidance beyond the first quarter.
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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