Avnet 2025 Q4 Earnings Mixed Results as Net Income Plummets 92.6%

Avnet reported mixed results for Q4 2025, with revenue growth of 1.0% but a sharp decline in net income. The company slightly beat sales expectations, driven by growth in Asia and Farnell. Guidance for Q1 2026 implies modest sequential revenue growth of around 2%, suggesting cautious optimism despite challenges in the Americas and EMEA.

Revenue

Avnet reported total revenue of $5.62 billion in Q4 2025, a 1.0% increase compared to $5.56 billion in Q4 2024. The Electronic Components segment led with $5.23 billion in sales, reflecting a modest 0.8% year-over-year growth. The Farnell segment contributed $386.50 million, a 3.0% increase from the prior year period. Geographically, Asia delivered strong performance with a 17.6% increase in sales to $2,691.1 million, while the Americas and EMEA faced headwinds, with sales declines of 2.0% and 16.7%, respectively. This regional divergence highlights the company's growing reliance on Asia for top-line growth.

Earnings/Net Income

Avnet's earnings performance was significantly weaker, with EPS plummeting to $0.07 in Q4 2025 from $0.92 in Q4 2024, a 92.4% decline. Net income also fell sharply to $6.09 million in Q4 2025, down 92.6% from $82.67 million a year ago. The decline in profitability was driven by a narrowing operating income margin, which fell to 1.3% in Q4 2025 from 3.0% in the same period the previous year. Adjusted diluted EPS was $0.81, a 33.6% decrease from $1.22 in Q4 2024. Despite effective cost management and working capital optimization, the earnings decline signals ongoing pressure on margins and operational efficiency.

Price Action

The stock of Avnet has seen negative price action in the short term. Shares fell 1.83% during the latest trading day, declined 10.32% over the most recent full trading week, and dropped 10.30% month-to-date. The negative momentum reflects investor concerns over the sharp drop in earnings and the broader challenges in key markets like EMEA and the Americas.

Post-Earnings Price Action Review

Despite the earnings decline, a strategy of buying AVT on the earnings beat and holding for 30 days yielded impressive results, with a 98.74% return, outperforming the 84.77% benchmark. The strategy's excess return of 13.97% and a compound annual growth rate (CAGR) of 15.10% highlight its effectiveness. While the 27.89% maximum drawdown indicates volatility, the positive Sharpe ratio of 0.54 underscores strong risk-adjusted performance, suggesting that the strategy remains viable for investors seeking to capitalize on earnings beats.

CEO Commentary

Phil Gallagher, Avnet’s CEO, emphasized the company’s fiscal 2025 performance, highlighting strong revenue of $22.2 billion and adjusted diluted EPS of $3.44. He credited cost management, working capital optimization, and strong supplier and customer relationships. The return to growth in Asia and Farnell was a key positive, with Asia reporting four consecutive quarters of year-over-year sales growth. Gallagher acknowledged challenges in the Americas and EMEA but expressed optimism for fiscal 2026, noting the potential for recovery driven by Asia's momentum, Farnell’s improvement, and normalized lead times.

Guidance

Avnet provided guidance for Q1 2026, expecting sales between $5.55 billion and $5.85 billion, with adjusted diluted EPS projected between $0.75 and $0.85. The midpoint implies sequential sales growth of approximately 2%, assuming growth across all regions. The guidance excludes restructuring costs, foreign exchange gains/losses, and certain tax adjustments, and assumes similar interest expenses to Q4 2025, an effective tax rate between 22% and 26%, and 85 million average diluted shares outstanding.

Additional News

On August 6, 2025, Avnet announced its Q4 and fiscal 2025 financial results, reporting $5.6 billion in sales and $0.07 diluted EPS. Adjusted diluted EPS was $0.81, and Farnell returned to year-over-year sales and operating income margin growth. Avnet’s CEO expressed confidence in the company’s recovery led by Asia’s steady growth and Farnell’s return to growth. The company generated $139 million in cash flow from operations and returned $50 million to shareholders through share repurchases, representing 1.3% of shares outstanding. Additionally, Avnet returned $28 million in dividends. The company also reduced inventories by $414 million in constant currency, demonstrating continued progress in working capital optimization.