Electronic components distributor Avnet (NASDAQGS:AVT) reported Q4 CY2025 results beating Wall Street’s revenue expectations, with sales up 11.6% year on year to $6.32 billion. On top of that, next quarter’s revenue guidance ($6.35 billion at the midpoint) was surprisingly good and 7.9% above what analysts were expecting. Its non-GAAP profit of $1.05 per share was 10.2% above analysts’ consensus estimates.

Is now the time to buy AVT? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

Avnet’s fourth quarter results drew a positive market response, as management emphasized broad-based double-digit sales growth driven by particularly strong demand in the Asia region and a notable rebound in the Americas and Europe. CEO Philip Gallagher credited the quarter’s momentum to record revenues in Asia and improved seasonal growth across geographies, with the Electronic Components business and Farnell both contributing. He highlighted that "demand increased across most of the verticals and geographies we serve," pointing to robust activity in compute and aerospace and defense end markets.

Looking ahead, Avnet’s guidance is shaped by expectations for continued recovery in Western regions, ongoing demand from data center and industrial customers, and the potential for improved operating leverage as higher-margin product categories recover. Management cited ongoing customer order visibility and emerging pricing pressure in select components as key themes, with Gallagher stating, "the supply dynamics suggest there may be upward pricing pressure across many technologies going forward." CFO Kenneth Jacobson added that the company expects further recovery in higher-margin regions, particularly as Europe and the Americas return to more typical seasonality.

Key Insights from Management’s Remarks

Management attributed the quarter’s outperformance to record Asia revenues, improvements in Europe and the Americas, and gains in higher-margin components and supply chain services.

• Record Asia sales: The Asia region reached over $3 billion in sales, marking its sixth consecutive quarter of year-on-year growth and now representing more than half of total company sales. Management identified both data center and industrial demand as key contributors.

• Demand creation and design wins: Avnet’s field application engineers drove a 7% sequential increase in demand creation revenues, with management noting a rise in design registrations and wins—an indicator of future sales pipeline strength.

• Farnell margin improvement: Farnell, Avnet’s high-service distribution arm, saw sequential and year-over-year growth, partially due to a recovering European market and increased sales of higher-margin onboard components. Management expects further margin gains as the mix continues to shift.

• IP&E business growth: The Interconnect, Passive, and Electromechanical (IP&E) segment posted double-digit growth, with management highlighting cross-selling opportunities and higher gross margins compared to core semiconductors.

• Inventory and supply chain efficiency: Avnet reduced inventory days and improved working capital, while also managing increased deliveries of high-demand memory and storage products—most of which shipped in January, reflecting effective supply chain execution.

Drivers of Future Performance

Avnet’s outlook focuses on sustained demand recovery, regional mix improvements, and the impact of evolving pricing trends on margins and growth.

• Regional mix and seasonal recovery: Management expects the Americas and Europe to benefit from a return to more typical seasonality, which should boost both revenue and operating margin as the sales mix shifts toward higher-margin regions, supporting improved overall profitability.

• Pricing trends and supply constraints: The company is seeing early signs of pricing pressure in memory, storage, and select passive components due to strong data center and industrial demand. Management noted that spot price increases could lift average selling prices and margin dollars, especially for non-contracted business.

• Margin expansion drivers: Farnell’s margin outlook is tied to continued recovery in Europe and an improving mix of onboard components. Management also pointed to ongoing cost controls and strategic investments in digital tools and AI as factors that could accelerate margin gains, particularly if demand in Western regions continues to strengthen.

Catalysts in Upcoming Quarters

Looking ahead, the StockStory team will closely watch (1) continued regional recovery in Europe and the Americas for signs of margin expansion, (2) the evolution of pricing dynamics in memory and passive components as supply-demand imbalances shift, and (3) progress in digital and supply chain initiatives designed to improve operating leverage. Developments in inventory management and the mix of higher-margin product sales will also be important markers of execution.

Avnet currently trades at $60.15, up from $52.68 just before the earnings. Is there an opportunity in the stock?Find out in our full research report (it’s free).

High Quality Stocks for All Market Conditions

Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.

The names generating the next wave of massive growth are right here in our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).

Stocks that have made our list include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.