Executive Summary
Avnet reported approximately $5.90 billion in quarterly revenue for QQ1 FY2026, delivering adjusted EPS of $0.84, near the high end of guidance, with a notable regional tilt toward Asia and Farnell posting double-digit year-over-year growth. Asia accounted for roughly half of sales, and the Americas showed YoY improvement for the first time since fiscal 2023, while EMEA stabilized and improved modestly relative to seasonal trends. Management flagged ongoing, selective price pressures in memory/storage and certain interconnect products tied to data-center and AI deployments, yet overall lead times remained stable. The company maintained a constructive view on demand creation and IP&E profitability, with Farnell contributing favorable mix dynamics. The backlog continues to grow and book-to-bill remains above parity, signaling a recovering demand environment. Near-term profitability benefited from regional mix and Farnell’s product mix, but gross margin declined modestly YoY and sequentially. The QQ2 guidance implies a 2% sequential revenue uptick with adjusted EPS in the range of $0.90-$1.00, underscoring an expectation of gradual margin stabilization as Asian and Americas growth supports leverage and scale. The company also signaled ongoing capital discipline (dividends up ~6%, share repurchases) and a target to reduce gross leverage toward 3.0x over the next year. Investors should monitor regional demand momentum (notably Asia and the Americas), the pace of inventory normalization (targeting the 80s days), memory/interconnect price dynamics, and the trajectory of IP&E and Farnell margin mix as the market recovers.
Key Performance Indicators
QoQ: -0.85% | YoY:-26.26%
QoQ: -41.14% | YoY:-37.40%
QoQ: -39.22% | YoY:-32.61%
Key Insights
Revenue: $5.8986 billion in QQ1 2026; YoY growth 6.03%, QoQ growth 10.97% (based on four-quarter trailing data). Gross Profit: $614.765 million; Gross Margin 10.42% (YoY -42 bps, QoQ -15 bps). Operating Income: $142.032 million; Operating Margin 2.41% (YoY -~26 bps, QoQ -~1 bp). EBITDA: $167.339 million; EBITDA Margin 2.83%. Net Income: $51.745 million; Net Margin 0.88%. EPS (GAAP): $0.62; Diluted EPS: $0.61. Adjusted Diluted EPS: $0.84 (high end of guidance). Balance Sheet: Total assets $12.414...
Financial Highlights
Revenue: $5.8986 billion in QQ1 2026; YoY growth 6.03%, QoQ growth 10.97% (based on four-quarter trailing data). Gross Profit: $614.765 million; Gross Margin 10.42% (YoY -42 bps, QoQ -15 bps). Operating Income: $142.032 million; Operating Margin 2.41% (YoY -~26 bps, QoQ -~1 bp). EBITDA: $167.339 million; EBITDA Margin 2.83%. Net Income: $51.745 million; Net Margin 0.88%. EPS (GAAP): $0.62; Diluted EPS: $0.61. Adjusted Diluted EPS: $0.84 (high end of guidance). Balance Sheet: Total assets $12.414b; Total debt $3.199b; Cash $175.5m; Net debt approx. $3.023b; Gross leverage 4.0x. Cash Flow: Operating cash flow negative at $(144.6) million; Free cash flow $(169.2) million. Working capital days 95; Inventory days 92; receivables up $176m; inventories up $185m; payables up $201m. Shareholder returns: Dividends up 6% to $0.35/share; repurchased ~2.6m shares worth $138m; 3% of shares repurchased in Q1; 8% over the last four quarters.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
5.90B |
6.03% |
10.97% |
| Gross Profit |
614.77M |
-4.37% |
4.58% |
| Operating Income |
142.03M |
-26.26% |
-0.85% |
| Net Income |
51.75M |
-37.40% |
-41.14% |
| EPS |
0.62 |
-32.61% |
-39.22% |
Management Commentary
Theme: regional recovery and contribution mix. Management highlighted Asia and Farnell posting double-digit YoY growth, with Americas returning to YoY growth for the first time since FY2023, and EMEA improving sequentially and stabilizing. Theme: AI/data-center opportunity anchoring incremental growth. The management emphasized AI-related demand in data-center and hyperscaler ecosystems, with opportunities extending beyond GPUs/FPGAs into storage, connectivity, power, cooling, and connectors, positioning Avnet for downstream MCU/NPU edge applications. Theme: inventory and margin trajectory. Commentary indicated inventory quality remains good despite a modest rise in days of inventory; the company aims to bring days in the 80s over time while investing for top-line growth. Theme: margin and guidance. Gross margin declined modestly YoY and sequentially due to regional mix, with expectations of seasonal improvement in coming quarters. The QQ2 guidance points to continued growth in Americas and Asia, flat Europe, and a target to expand margins as mix normalizes. Quotes from the call emphasize the hyperscaler exposure (roughly 7% of Asia sales) and the focus on AI-edge opportunities along with a commitment to inventory discipline and leverage reduction.
"our exposure to the hyperscalers is, on a grand scheme, maybe in Asia, 7% of our business... the opportunities we're seeing in storage, connectivity, power, cooling, connectors... downstream opportunities are going to be massive in our MCU/NPU area. AI on the edge is a sweet spot for us."
— Philip Gallagher
"The quality of the inventory is good, the aging and the quality is good. So we have no concerns there. Our longer-term goal will get back into the 80s."
— Philip Gallagher
Forward Guidance
QQ2 FY2026 guidance calls for revenue of $5.85–$6.15 billion and adjusted diluted EPS of $0.90–$1.00, implying about a 2% sequential revenue increase at the midpoint. Management expects growth to be driven by the Americas and Asia, with Europe flattish. Tax rate guidance is 21–25%, with ~83 million diluted shares. The company reiterated a plan to reduce gross leverage toward ~3.0x over the next year and continues to prioritize reinvestment in the business and shareholder returns (dividends and buybacks). Key risk factors include continuing price pressure in memory/storage and certain interconnects tied to AI/data-center expansion, potential macro weakness in Europe, currency headwinds, and the pace of supply-chain normalization. Monitoring points for investors: (1) progression of inventory normalization toward the 80s days, (2) actualizing the anticipated gross margin improvement from Asia mix and Farnell mix rebound, (3) stability of IP&E and demand-creation margin contributions, and (4) the trajectory of leverage reduction and free cash flow generation as working capital normalizes.