Avnet Inc.’s 2026 Q4 Earnings Call: Memory Pricing Impact, Expanding Hikes Clash With Prior Guidance

Date of Call: Aug 5, 2026

Financials Results

• Revenue: $8.3 billion, up 48% YOY and up 17% sequentially
• EPS: $2.28 per diluted share (adjusted), a quarterly record and up 3.8x YOY
• Gross Margin: 10.4%, up 5 basis points sequentially but down 14 basis points YOY
• Operating Margin: 3.8% (adjusted operating margin), up over 70 basis points sequentially

Guidance:

• Q1 sales guided to $9.0B-$9.3B, implying ~10% sequential growth at midpoint.
• Q1 adjusted diluted EPS guided to $2.80-$2.90.
• Assumes current market conditions persist, with modest price increases expected.
• SG&A as a % of gross profit expected to improve below 60% by end of FY2027.
• Farnell expected to reach double-digit operating margins before end of FY2027.

Business Commentary:

Record Financial Performance:

• Avnet reported record sales of $8.3 billion for the fourth quarter of fiscal year 2026, up 48% year-on-year and 17% sequentially.
• This exceptional growth was driven by improving demand across all core markets, strong execution by teams, and expanded margins from operating leverage.

Geographic and Segment Growth:

• The Americas region experienced a 55% year-over-year sales increase, contributing significantly to the overall growth, while Asia and EMEA also showed robust increases of 46% and 44% respectively.
• Growth was broad-based across all regions and end markets, indicating a strong recovery that is not tied to a single market.

Operating Margin Expansion:

• Avnet achieved an adjusted operating margin of 3.8%, with the electronic components segment reaching 4% and Farnell at 9%.
• The margin expansion was supported by the company's ability to manage operating expenses effectively and leverage its sales growth.

Inventory Management:

• Inventory days improved to 71 days, the lowest level in nearly four years, with electronic components inventory days below 65 days.
• This improvement was due to disciplined inventory management and the company's capacity to invest in inventory to capture growth opportunities.

Pricing Dynamics and Supply Chain:

• More than one-third of the sales growth was attributed to pricing increases, particularly in memory products, with expectations for further price increases across semiconductor and IP&E suppliers.
• The supply environment continued to tighten with extended lead times, impacting demand across various product categories, and positioning Avnet to benefit from the broader demand recovery.

Sentiment Analysis:

Overall Tone: Positive

• CEO called results "exceptional" and "record quarter," with "improving demand across all core markets." Management expressed being "optimistic but grounded," with backlog extending and "confidence that the improvement in demand is not tied to a single end market." Guidance was "well above" expectations, and the tone highlighted "great momentum" and "positioned to achieve new records."

Q&A:

• Question from Joseph Quattrocchi (Wells Fargo): Could you talk more about pricing dynamics embedded in the guide, memory pricing impact on EBIT, and unit inventory increase for FY2027?
  Response: Price increases are broadening beyond memory, with modest increases assumed in guidance. Memory pricing contributed about a third of both sales and gross profit dollar growth, with minimal difference in EBIT impact. Inventory increase was over 50% due to pricing (primarily memory); unit inventory will need to support higher volumes, with inventory days expected to improve in EC.

• Question from William Stein (Truist Securities): Where are we in the cycle ("inning") and what are gross/operating margin expectations and the 5% target?
  Response: Cycle is in the "front third" (like 3rd/4th inning). Expect continued steady margin progress, with Farnell gross margins improving from higher mix of on-board components and EC margins influenced by regional mix. The 5% operating margin target remains, requiring stronger performance in the West (Americas, Europe).

• Question from Roopu Bodikaria (Bank of America): What drove Americas' outsized growth and what is embedded in the revenue guide regarding memory/unit volumes and risk of double-ordering/precautionary buying?
  Response: Americas growth was broad-based across verticals (industrial, aerospace, defense, transportation), not just data center. Guide is driven by units/volumes, not significant pricing, with higher ASP mix. No evidence of excess customer builds or demand destruction; backlog and book-to-bill are strong, and lead times are extending.

• Question from Melissa Fairbanks (Raymond James): Can you quantify Farnell's sustainable margin profile and comment on automotive OEM/tier 1 inventory dynamics?
  Response: Farnell's margin includes benefits from accelerated ASPs (like memory), but modeling shows a higher sustainable margin profile than last cycle. In transportation/auto, demand is increasing, and there is intentional focus on securing inventory to avoid supply chain disruptions, which is benefiting Avnet.

Contradiction Point 1

Memory Price Impact on Financials

Inconsistent statements on memory pricing's contribution to EBIT and sales growth.

What were the key takeaways from Joseph Quattrocchi's earnings call at Wells Fargo? - Joseph Quattrocchi (Wells Fargo)

2026Q4: Memory prices drove about one-third of sequential and year-over-year sales growth. - Ken Jacobson(CFO)

Could you discuss pricing dynamics, including the impact of memory pricing on EBIT, the guidance for memory pricing changes, and the inventory unit increase for FY2027? - Joseph Quatrochi (Wells Fargo)

2026Q3: Memory price increases contributed approximately the same percentage to sequential EBIT growth as they did to sales growth. - Ken Jacobson(CFO)

Contradiction Point 2

Future Pricing Outlook

Contradiction on the materiality and expectation of future price increases beyond memory.

Joseph Quattrocchi (Wells Fargo) - Joseph Quattrocchi (Wells Fargo)

2026Q4: Price increases are expanding beyond memory to other components, though modestly. - Phil Gallagher(CEO)

Could you discuss pricing dynamics, including the impact of memory pricing on EBIT, the guidance for memory pricing changes, and the unit increase in inventory for FY2027? - Melissa Dailey Fairbanks (Raymond James)

2026Q3: Any other price increases are not yet material and will be more modest. - Philip Gallagher(CEO)

Contradiction Point 3

Industry Cycle Stage Assessment

Contradictory statements on where the industry cycle currently stands.

Can you provide an update on the company's financial performance and outlook? - William Stein (Truist Securities)

2026Q4: The cycle feels like it's in the third or fourth inning ('front third of the game'), not near the end. - Phil Gallagher(CEO)

What is the current stage of the industry cycle, and how does it impact the potential for higher gross margins and future margin expansion? - William Stein (Truist Securities, Inc., Research Division)

2026Q2: Visibility from customers is improving, with suppliers requesting more backlog information. Gallagher emphasized the need for better long-term visibility to manage the supply chain effectively. - Phil Gallagher(CEO)

Contradiction Point 4

Customer Inventory Dynamics and Order Patterns

Inconsistent portrayal of customer order behavior and inventory levels.

Melissa Fairbanks (Raymond James) - Melissa Fairbanks (Raymond James)

2026Q4: The company is having conversations with transportation customers about supply chain resilience to avoid the 'bad outcomes' of shortages seen previously... The company uses analytics and supplier collaboration to monitor for forecast inflation ('double booking'). - Phil Gallagher(CEO)

Can you quantify the sustainable margin profile for Farnell, considering the pressure from automotive OEMs on tier 1s to secure more inventory? - William Stein (Truist Securities, Inc., Research Division)

2026Q2: There is an increasing trend of customer orders being placed within lead times (orders 'dropping inside'), which indicates potential inventory depletion. - Philip Gallagher(CEO)

Contradiction Point 5

Inventory Days Outlook

Contradictory guidance on future inventory days levels.

Joseph Quattrocchi (Wells Fargo) - Joseph Quattrocchi (Wells Fargo)

2026Q4: Inventory days are expected to improve, particularly in the Electronic Components (EC) business. - Ken Jacobson(CFO)

Could you discuss pricing dynamics, including the impact of memory pricing on EBIT, the guidance for memory pricing changes, and the unit inventory increase for FY2027? - William Stein (Truist Securities)

2026Q1: There is opportunity to reduce inventory in excess locations while sales grow. The long-term goal is to bring days down into the 80s while still making necessary investments. - Philip Gallagher(CEO)