Executive Summary

Consolidated sales were $6.81B, down 2% YoY but above the high end of guidance; GAAP diluted EPS was $1.51 and non-GAAP diluted EPS was $1.80 — both above guidance, driven by EMEA momentum, value-added offerings, and continued ECS strength .
ECS delivered 18% YoY sales growth to $2.04B with 5% billings growth; components declined 8% YoY to $4.78B but outperformed seasonal trends; consolidated non-GAAP gross margin was 11.3% (mix-driven compression YoY) .
Q2 2025 guidance: sales $6.70–$7.30B; GAAP EPS $2.80–$3.00 and non-GAAP EPS $1.90–$2.10; FX tailwind vs prior year; guidance excludes an expected 2%–4% sequential uplift to components sales from newly implemented tariffs .
Management flagged cyclical turning point indicators: book-to-bill at or above parity across regions, growing backlog, improving visibility; ECS backlog grew >50% YoY, with recurring revenue approaching one-third of billings — potential catalysts for sentiment and estimate revisions .

What Went Well and What Went Wrong

What Went Well

“Delivered both consolidated and segment revenue, as well as earnings per share, that exceeded our guidance ranges,” with EMEA momentum, value-added offerings, and ECS performance as drivers .
ECS growth: sales +18% YoY, billings +5% YoY; broad-based EMEA strength and North America acceleration; backlog up >50% YoY, with recurring revenue approaching one-third of total billings .
Operational execution: ~$352M cash from operations, ~$340M net working capital reduction, ~$280M gross debt reduction, and $50M share repurchases in Q1 .

What Went Wrong

Mix headwinds drove consolidated non-GAAP gross margin to 11.3%, down ~120 bps YoY; components gross margin 11.6% and ECS at 10.8% (non-GAAP) .
Components declined 8% YoY with EMEA components -19% YoY; FX was a headwind of ~$84M on sales and ~$0.08 on diluted EPS YoY .
Tariff uncertainty: Q2 outlook excludes an expected 2%–4% sequential increase in components sales from newly implemented tariffs; management is mitigating margin risk via intelligent sourcing/routing and foreign trade zones but highlighted complexity and customer confusion near term .

Financial Results

Consolidated and Segment Performance

Metric	Q3 2024	Q4 2024	Q1 2025
Revenue ($USD Millions)	$6,823	$7,283	$6,814
GAAP Diluted EPS ($)	$1.88	$1.86	$1.51
Non-GAAP Diluted EPS ($)	$2.38	$2.97	$1.80
Gross Profit ($USD Millions)	$784.8	$803.3	$774.0
Components Sales ($USD Millions)	$4,946.1	$4,813.8	$4,777.7
ECS Sales ($USD Millions)	$1,877.3	$2,469.1	$2,036.3
Components Operating Income ($USD Millions)	$188.6	$116.9	$171.4
ECS Operating Income ($USD Millions)	$75.6	$160.4	$77.3

YoY and Sequential Context (Q1 2025)

Metric	Q1 2024	Q1 2025	YoY Change
Revenue ($USD Millions)	$6,924	$6,814	-2%
GAAP Diluted EPS ($)	$1.53	$1.51	-$0.02
Non-GAAP Diluted EPS ($)	$2.41	$1.80	-$0.61
Components Sales ($USD Millions)	$5,191.4	$4,777.7	-8%
ECS Sales ($USD Millions)	$1,732.8	$2,036.3	+18%

Segment and Regional Breakdown (Q1 2025)

Segment/Region	Sales ($USD Millions)	YoY Change
Components – Americas	$1,568.6	-1.8%
Components – Asia	$1,869.2	-3.6%
Components – EMEA	$1,340.0	-19.1%
ECS – Americas	$909.9	+0.2%
ECS – EMEA	$1,126.4	+36.5%

KPIs and Balance Sheet/Cash Flow (Q1 2025)

KPI	Q1 2025	Prior Period	Note
Cash from Operations ($USD Millions)	$351.7	$403.2 (Q1’24)	Seventh consecutive quarter of positive CFO
Inventory ($USD Millions)	$4,798.6	$4,709.7 (FY’24 end)	Aging profile improved; turns near historical
Accounts Receivable ($USD Millions)	$12,423.6	$13,031.0 (FY’24 end)
Gross Balance Sheet Debt ($USD Billions)	~$2.8	$3.1 (Q4’24)	Reduced ~$0.3B QoQ
Net Working Capital Reduction ($USD Millions)	~$340	—
Share Repurchases ($USD Millions)	~$50	$250 FY’24	Authorization remaining ~$275M
Cash Conversion Cycle (Days)	77	77 (Q4’24)	Stable

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance/Actual	Change
Consolidated Sales ($B)	Q1 2025	$5.98–$6.58	Actual: $6.81	Beat vs high end
Components Sales ($B)	Q1 2025	$4.35–$4.75	Actual: $4.78	Beat vs high end
ECS Sales ($B)	Q1 2025	$1.63–$1.83	Actual: $2.04	Beat vs high end
GAAP Diluted EPS ($)	Q1 2025	$0.98–$1.18	Actual: $1.51	Beat
Non-GAAP Diluted EPS ($)	Q1 2025	$1.30–$1.50	Actual: $1.80	Beat
Tax Rate (%)	Q1 2025	23–25	Actual (non-GAAP): 22.9	Slightly below midpoint
Consolidated Sales ($B)	Q2 2025	n/a	$6.70–$7.30	Introduced
Components Sales ($B)	Q2 2025	n/a	$4.80–$5.20	Introduced (excludes 2–4% tariff uplift)
ECS Sales ($B)	Q2 2025	n/a	$1.90–$2.10	Introduced
GAAP Diluted EPS ($)	Q2 2025	n/a	$2.80–$3.00	Introduced
Non-GAAP Diluted EPS ($)	Q2 2025	n/a	$1.90–$2.10	Introduced
Interest Expense ($M)	Q2 2025	n/a	~$60	Introduced
Tax Rate (%)	Q2 2025	n/a	23–25	Introduced
FX Impact	Q2 2025	n/a	Tailwind: ~$58M sales YoY; +$0.03 EPS YoY	Introduced

Earnings Call Themes & Trends

Topic	Q3 2024 (10/31/24)	Q4 2024 (2/6/25)	Q1 2025 (5/1/25)	Trend
Cycle/Demand Indicators	Ecosystem inventory correction persists	Late innings of correction; book-to-bill just shy of parity; backlog stabilizing	Book-to-bill at/above parity across regions; backlog growing; visibility improving	Improving
ECS Momentum	Hybrid cloud strength; improving North America	Growth in hybrid cloud, infra software, AI-related data center; billings +10% YoY	Billings +5% YoY; backlog +50% YoY; recurring nearing 1/3 of billings	Strengthening
Tariffs/Macro	—	EMEA subseasonal; macro challenges	Tariffs could add 2–4% to components sales (not in guide); margin mitigation; limited pull-ins	Uncertain but manageable
Supply Chain/Inventory	Inventory down ~$125M QoQ; ~$1.3B over 12 months	Inventory $4.7B; down ~$1.1B from peak; CCC 77 days	Inventory $4.8B; turns/aging improving; NWC -$340M	Normalizing
Regional Trends	EMEA components -35% YoY	EMEA subseasonal; executing well	EMEA momentum across segments; ECS EMEA sales +37% YoY	EMEA ECS strong; components still down YoY
AI/Technology Initiatives	ArrowSphere global availability (prior)	AI adoption supporting data center activity	Launched Global AI Accelerator Program for partners (ArrowSphere AI tools, AI Academy, AI Factory)	Expanding AI engagement

Management Commentary

“Improving trends across the broader market, including healthy momentum in EMEA… value-added offerings… continued performance in our ECS business” underpinning beats vs guidance .
“Book-to-bill ratios improved… at or above parity in all 3 regions… backlog is growing again” as indicators of a cyclical turning point .
ECS: “Year-over-year growth in billings, gross profit, and operating income… backlog grew more than 50% year-over-year… recurring revenue volumes now approaching 1/3 of our total billings mix” .
CFO: “Non-GAAP diluted EPS for the first quarter was $1.80… net working capital declined ~$340M… cash flow from operations was $352M… CCC 77 days” .
Q2 guidance excludes tariffs: “Incremental tariffs could increase global components sales by 2 to 4 percentage points sequentially… not in our baseline guide” .

Q&A Highlights

Tariffs: Clarified the 2%–4% sequential components uplift represents surcharges/price uplifts; margin risks mitigated via intelligent routing, FTZ capabilities, and process changes; guidance separates core business from tariff effects .
Inventory/Turns: Inventory levels near appropriate long-term ranges with pockets of excess improving; turns expected to improve modestly as demand recovers; IP&E commitment implies different working capital profile .
Order Behavior: Limited evidence of tariff-related pull-ins; US backlog building into Q3/Q4 rather than immediate term; Asia shows some activity but not needle-moving .
Visibility: Preconditions improving — declining ecosystem inventories, better book-to-bill, backlog building out in time; suppliers’ outlooks will lead recovery .

Estimates Context

Metric	Consensus (S&P Global)	Actual	Surprise
Revenue ($USD)	$6,320,028,330*	$6,814,017,000	+$493,988,670*
Primary EPS ($)	$1.434*	$1.80 (non-GAAP)	+$0.366*
# of Estimates (EPS/Revenue)	5 / 5*	—	—

Values retrieved from S&P Global.

Implication: Meaningful beats on both revenue and EPS likely necessitate upward revisions for near-term quarters and FY models, tempered by tariff uncertainty and mix-driven margin dynamics .

Key Takeaways for Investors

Both consolidated and segment revenue, and EPS beat guidance; ECS strength and EMEA momentum were key drivers — supports a “turning point” narrative in components while ECS continues to compound .
ECS backlog expanded >50% YoY; recurring revenue approaching one-third of billings — durable visibility and margin support in a seasonally lighter Q1 .
Components posted ahead-of-seasonal performance with improving leading indicators (book-to-bill ≥1.0, backlog growth) — inventory turns and aging improving, positioning for recovery as mass market returns .
Mix compressed consolidated non-GAAP gross margin to 11.3% YoY; monitor segment mix (ECS vs components, EMEA vs Americas/Asia) and tariff pass-through effectiveness for margin trajectory .
Q2 guidance provides an FX tailwind vs prior year but excludes a 2%–4% tariff-driven uplift to components — upside optionality if tariffs flow through as estimated .
Balance sheet discipline continues: ~$352M CFO, ~$340M NWC reduction, ~$280M gross debt reduction, and ongoing buybacks ($50M) — enhances resilience and shareholder return capacity .
Strategic AI initiatives (AI Accelerator Program) and ArrowSphere platform adoption deepen ECS differentiation — a medium-term thesis lever on recurring/“as-a-service” growth .

Appendix: Non-GAAP Adjustments (Q1 2025)

Item	EPS Impact ($)
Intangible amortization	$0.07
Restructuring & integration	$0.25
Wind-down inventory impact	-$0.03
Non-GAAP diluted EPS	$1.80

Appendix: Q2 2025 FX and Tariffs Notes

FX expected to increase reported sales by ~$58M and diluted EPS by ~$0.03 vs Q2 2024; quarter-over-quarter FX tailwind ~$109M sales and ~$0.03 EPS vs Q1 2025 .
Tariffs estimated to add 2–4 percentage points to global components sales sequentially; not included in Q2 guidance; management pursuing routing/FTZ/process mitigations to protect margins .

ARROW ELECTRONICS, INC. (ARW)·Q1 2025 Earnings Summary