Avnet Tops Q2 Estimates, Provides Strong Q3 Outlook as Inventory Management Pays Off
Global technology distributor Avnet Inc (NASDAQ:AVT) reported fiscal second-quarter 2026 results that exceeded analyst expectations, driven by broad-based sales growth and improved operational efficiency. The company’s performance and optimistic guidance for the current quarter have been met with positive momentum in the stock.
Earnings and Revenue: A Clean Beat
For the quarter ended December 27, 2025, Avnet delivered a clear outperformance on both the top and bottom lines. The company’s focus on optimizing its inventory levels and driving operational leverage was evident in the results.
- Revenue: Sales reached $6.32 billion, a solid 11.6% increase year-over-year. This figure surpassed the analyst consensus estimate of approximately $6.09 billion.
- Earnings Per Share (Non-GAAP): Adjusted diluted EPS came in at $1.05, significantly higher than the $0.84 reported in the prior quarter and beating the Wall Street estimate of $0.962 per share.
The sequential improvement was particularly notable. While sales grew 7.1% from the first quarter, adjusted operating income grew 14.0%, and adjusted EPS surged 25.0%. CEO Phil Gallagher highlighted this dynamic, stating, "Sequentially, our adjusted operating income grew two times faster than sales, demonstrating the expected leverage in our business model."
Key Operational Highlights from the Quarter
Beyond the headline numbers, the earnings release underscored several positive trends across Avnet’s business segments and geographies:
- Regional Growth: The company saw year-over-year sales growth in all regions. Asia led with record revenue of $3.17 billion, marking its sixth consecutive quarter of growth. The Americas and EMEA regions also returned to growth, while the Farnell business posted its third straight quarter of year-over-year sales increases.
- Margin Improvement: Both the core Electronic Components (EC) and Farnell segments saw operating margins improve sequentially. Farnell’s margin expanded dramatically to 4.7%, up from 1.0% in the year-ago period.
- Inventory and Cash Flow: A major focus for management, inventory was reduced by $126 million in the quarter, bringing days of inventory down to 86. Strong operational execution also generated $208 million in cash flow from operations.
Market Reaction and Forward Guidance
The market responded favorably to the report and the company's subsequent outlook. In pre-market trading following the release, AVT shares were up approximately 4.3%, indicating investor approval of the results and future prospects.
This positive sentiment is likely bolstered by Avnet’s guidance for the third quarter of fiscal 2026, which was notably above analyst expectations.
- Q3 2026 Revenue Guidance: Avnet expects sales between $6.20 billion and $6.50 billion, with a midpoint of $6.35 billion. This midpoint is about 7.9% higher than the analyst consensus estimate of $5.91 billion prior to the report.
- Q3 2026 EPS Guidance: The company forecasts adjusted diluted EPS in the range of $1.20 to $1.30, with a midpoint of $1.25.
Management characterized this outlook as implying "above-trend seasonal growth and improving margins," suggesting confidence in the ongoing momentum.
Valuation and Estimates Context
The strong quarterly beat and raised guidance come against a backdrop of rising analyst estimates. Prior to the report, consensus estimates for the full fiscal year 2026 were already anticipating growth. Avnet’s performance and guidance will likely lead to further revisions, as the company demonstrates its ability to navigate the electronics supply chain cycle effectively.
Conclusion
Avnet’s second-quarter results paint a picture of a company executing well on its strategic priorities. By successfully managing inventory and capitalizing on demand across its global footprint, Avnet not only beat quarterly estimates but also set a higher bar for the current period. The market’s immediate positive reaction reflects approval of both the strong financial performance and the management team’s optimistic view of the near-term future. As the electronics distribution cycle evolves, Avnet’s operational discipline and broad geographic reach appear to be key differentiators.
For a detailed look at Avnet’s historical earnings and future analyst estimates, you can review the data here.
Disclaimer: This article is for informational purposes only and does not constitute financial advice, nor does it recommend any investment action. Investors should conduct their own research and consult with a qualified financial advisor before making any investment decisions.
