Avnet (NASDAQ:AVT) reported second-quarter fiscal 2026 results that management said exceeded the high end of the company’s sales and earnings guidance, citing record revenue in Asia, better-than-typical seasonal performance in the Americas and Europe, and improving demand signals across multiple end markets.
Quarterly results exceeded guidance as margins improved
Chief Executive Officer Phil Gallagher said the company delivered sales of $6.3 billion and generated more than $200 million of cash flow from operations during the quarter, while reducing inventory dollars and days “as projected.” Gallagher also highlighted operating margin performance of 3.2% in Avnet’s electronic components (EC) business and 4.7% in its Farnell business.
Gross margin was 10.5%, which Jacobson characterized as “flattish” year-over-year and up slightly sequentially. He said EC gross margins continued to be affected by Asia growing faster than Western regions, while Farnell gross margins were up more than 100 basis points year-over-year but down 25 basis points sequentially.
Adjusted operating income was $172 million and the total adjusted operating margin was 2.7%, Jacobson said. By segment, electronic components produced operating income of $187 million and an operating margin of 3.2%, while Farnell generated operating income of $20 million and a 4.7% operating margin. Jacobson said Farnell’s operating margin was the highest since fiscal 2023, up nearly 40 basis points from the prior quarter.
Adjusted diluted earnings per share were $1.05, which Jacobson said exceeded the high end of guidance for the quarter. Interest expense was $61 million and the adjusted effective tax rate was 23%, both described as consistent with expectations.
Demand signals reset higher as lead times trend up
Gallagher said demand increased sequentially in most of the verticals Avnet serves, led by strong demand in compute and aerospace and defense. He added that year-over-year improvement was broad-based across most verticals.
Management said demand signals “continue to reset globally,” with lead times trending higher across most product categories. Gallagher attributed the lead-time trend largely to data center and artificial intelligence demand, but said it is broadening as projected growth rates of tracked segments continue to improve.
Gallagher also said Avnet is seeing more customers placing orders within lead times, along with higher instances of deliveries beyond lead times, creating a mismatch between customer request dates and supplier delivery dates. He described this as an opportunity for Avnet to provide supply chain value by addressing those misalignments.
The company said the pricing environment was stable during the quarter, though management noted spot price increases in some areas and suggested the potential for broader upward pricing pressure as supply dynamics tighten.
Regional and business highlights: record Asia sales and recovery signs in Europe
In electronic components, Gallagher said Avnet delivered year-over-year and sequential sales growth across all regions. Asia posted record sales of more than $3 billion, marking the sixth consecutive quarter of year-over-year sales growth in the region, he said.
In EMEA, Gallagher said Avnet is seeing “clear signs of recovery,” with sales up both sequentially and year-over-year. He said most end markets grew year-over-year, including industrial, while compute, consumer, and transportation were the strongest quarter-over-quarter. Gallagher also pointed to new regional leadership, saying he was confident EMEA’s new leader, Gilles Beltran, would drive profitable growth.
In the Americas, Gallagher said sales increased sequentially and year-over-year for the second consecutive quarter. He said sequential growth was led by aerospace and defense, while industrial, communication, and compute were the strongest year-over-year end markets.
Gallagher highlighted several EC growth and margin expansion efforts, including demand creation, supply chain services, embedded solutions, and the interconnect, passive and electromechanical (IP&E) business. He said demand creation revenues increased 7% sequentially and that design registrations and wins also rose sequentially. He also said the IP&E business posted double-digit year-over-year growth, noting that IP&E products carry higher gross margins and offer cross-selling opportunities alongside semiconductors.
For Farnell, Gallagher said sales grew sequentially and year-over-year, reflecting recovery across all three regions, which he said could indicate engineers are developing new products. He said operating margins improved sequentially in line with expectations and that Farnell is gaining traction with single-board components through “Power of One” initiatives leveraging Avnet and Farnell digital platforms. Gallagher said Farnell’s mix remains weighted toward test and measurement, maintenance and repair, and single-board computers, but he expects gross and operating margins to improve as demand for higher-margin on-board components recovers, particularly in Europe.
Inventory reductions, leverage, and capital allocation
Jacobson said working capital declined $42 million sequentially and working capital days fell seven days quarter-over-quarter to 88 days. Inventory was reduced by $126 million, or 2.3% sequentially. He noted that at quarter-end the EC business received approximately $150 million of high-demand inventory related to memory and storage products, partially offsetting broader reductions, and he added that “substantially all” of those products were shipped to customers in January.
Avnet ended the quarter with 86 days of inventory, as it continues working toward reducing total company inventory days to below 80, Jacobson said. He also provided context on differing inventory models between segments, noting EC typically runs four to six turns per year while Farnell typically runs 1.5 to two turns per year. At quarter-end, EC had less than 80 days of inventory and Farnell had less than 230 days, he said.
Cash flow from operations was $208 million, and capital expenditures were $15 million, according to Jacobson. He said Avnet paid down additional debt during the quarter and ended with gross leverage of 3.9 times and approximately $1.7 billion of available committed borrowing capacity. Jacobson said the company still expects to reduce leverage to approximately three times over the next year. Avnet also paid a quarterly dividend of $0.35 per share, or $28 million.
Guidance: modest sequential sales growth with Western recovery
For the third quarter of fiscal 2026, Jacobson guided sales to a range of $6.2 billion to $6.5 billion and diluted EPS of $1.20 to $1.30. He said the midpoint implies roughly 1% sequential sales growth, assuming current market conditions persist.
Management said the sales outlook reflects growth in the Americas and EMEA, with a “less than seasonal” sales decline in Asia due to the Lunar New Year. Jacobson said the guidance implies further recovery in higher-margin Western regions, which he said would accelerate operating leverage. The outlook assumes interest expense similar to the second quarter, an effective tax rate between 21% and 25%, and 83 million diluted shares outstanding.
In the Q&A, management discussed typical December-quarter booking patterns, noting that bookings tend to tail off in the second half of December while billings continue. Gallagher said the company’s book-to-bills were positive across regions, and he described improving customer visibility as Avnet and its suppliers seek clearer backlog and forecasting signals. He also said the company has seen increases announced and expected in certain categories, including memory and storage, controllers, and selected components such as capacitors, while Jacobson noted those increases did not materially impact the reported quarterly results.
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.
-logo-1200x675.png&h=45&w=95&zc=2){kind=logo}
