Avnet Rides Broad-Based Demand Recovery to Record Quarter and Raises Bar
Components distributor delivers 48% y/y revenue growth, operating leverage expanding as memory pricing and broad cycle improvement flow through.
AVT · Earnings Call · 2026-08-05
A Record Finish to Fiscal 2026
Avnet's fiscal Q4 2026 was, by any measure, a blowout. “We delivered a record quarter across all key metrics in both our Electronic Components and Farnell businesses, supported by improving demand across all of our core markets,” — Philip Gallagher, Chief Executive Officer · 2026-08-05 said CEO Phil Gallagher. The numbers back him up: revenue hit $8.3 billion, up 48% year-over-year and 17% sequentially, with all three regions (Americas +55%, Asia +46%, EMEA +44%) growing double digits. This is not a one-off — it extends a record sales streak, and management now expects another ~10% sequential increase in Q1 FY2027. The call's tone moved from cautious optimism to outright confidence, with improving demand broad-based across end markets, not just the AI trade.Operating Leverage and the Margin Model
The key to the quarter was not just revenue — it was the operating leverage. SG&A as a percentage of gross profit dropped to 63% from 70% last quarter and 76% a year ago. CFO Ken Jacobson stated, “We expect that our SG&A expenses as a percentage of gross profit will continue to improve to below 60% before the end of fiscal 2027.” — Ken Jacobson, Chief Financial Officer · 2026-08-05 This disciplined expense control, combined with a 3.8% adjusted operating margin (the fourth consecutive quarter of expansion), drove adjusted EPS to $2.28, a quarterly record. The company is targeting operating income growth at approximately twice the rate of sales growth near term. While gross margin fell 14 bps y/y to 10.4% due to mix (Asia being a larger share), the operating margin trajectory is clearly positive. Prior calls have emphasized the same lever. As Phil noted back in January, “pricing really affects the average selling price... where it is not, and it is, let us call it spot buys... we can increase margins there, the price and the margins.” — Philip R. Gallagher, Chief Executive Officer · 2026-01-28 That pricing pass-through, amplified by tight memory supply, is now a core part of the story.Pricing, Inventory, and the Cycle
Memory pricing contributed roughly one-third of both sequential and year-over-year revenue growth, but the impact stretches beyond revenue. memory pricing also boosted gross profit dollars without hurting margin percentage, and it is filtering into other categories as lead times extend. Inventory days improved to 71, the lowest in nearly four years, even as inventory dollars grew 11% (over half of that from pricing). Ken explained, “About half of the increase came from pricing, specifically memory. And again, some of that's just timing differences, right, in terms of when we got product and things of that nature.” — Ken Jacobson, Chief Financial Officer · 2026-08-05 This inventory efficiency is a recurring theme — prior calls consistently highlighted working capital discipline. But the real shift is the pricing dynamic; this is no longer just about destocking. With book-to-bill “solidly above 1” and backlog extending well into FY2027, management sees genuine demand pull rather than panic buying.Phil's baseball analogy captures the cycle positioning: early-to-mid stage of an upcycle. Even with eight consecutive quarters of year-over-year growth in Asia, he sees runway. The company’s AI infrastructure exposure is real but modest (10-15% of sales directly), with the broader industrial and aerospace/defense markets providing diversification. This is a classic distributor upcycle — and Avnet is positioned to capture it with operating leverage.I'd say we're -- you talk to, but for most part or customers, it feels like maybe in the third or fourth inning, maybe something along those lines, if I was going to put it in baseball terms. For sure, not the eighth inning.