AVNET INC (AVT)·Q3 2025 Earnings Summary

Executive Summary

• Q3 FY2025 revenue was $5.32B and GAAP diluted EPS $1.01; adjusted diluted EPS $0.84. Asia delivered its third consecutive YoY sales growth while EMEA remained the weakest region .
• Results were above company guidance and beat S&P Global consensus estimates: Revenue beat by ~$63M and adjusted EPS beat by ~$0.13; GAAP EPS was above prior year and sequentially higher * [functions.GetEstimates].
• Operating margin compressed YoY on mix shift toward Asia; adjusted operating margin was 2.9% vs 3.6% last year. A $9M gain-on-sale leaseback benefited adjusted EPS by ~$0.08, and interest expense fell YoY on lower borrowings .
• Q4 FY2025 guidance implies flat sequential sales at the midpoint ($5.15B–$5.45B; adj. EPS $0.65–$0.75), with lower EMEA in constant currency and flattish Americas/Asia; share count assumption drops to 86M diluted shares and tax rate guided to 21–25% .
• Capital returns remained active: $101M buybacks (~2.3% of shares) and $28M dividends; operating cash flow was $141M in Q3 and $585M year-to-date; gross leverage 3.2x with ~$1.2B committed capacity .

What Went Well and What Went Wrong

What Went Well

• Asia strength: Third consecutive YoY growth; Q3 Asia sales +13% YoY despite seasonal declines; book-to-bill reached parity in Asia, with IP&E above parity company-wide .
• Farnell execution improving: Farnell sales +6.1% QoQ; operating margin rose to 3.0% from 1.0% in Q2; management “encouraged” by progress and targeting steady improvements .
• Cash generation and capital returns: $141M operating cash flow in Q3; $859M over the last four quarters; $101M buybacks and $28M dividends in Q3 .

What Went Wrong

• Margin pressure: Operating margin 2.7% vs 3.4% prior-year; adjusted operating margin 2.9% vs 3.6%, driven by mix shift to Asia and weaker EMEA .
• EMEA weakness: EMEA sales -24.1% YoY and slight sequential decline; management cited persistent macro/geopolitical headwinds and consumer confidence dampening .
• Inventory reductions slower than desired: Inventories decreased ~$57M in constant currency QoQ; management still expects additional reductions but acknowledged pace is modest given softer demand .

Financial Results

Headline metrics vs prior year and prior quarter

Segment performance

Geographic mix

Estimates vs actuals (S&P Global consensus)

Values retrieved from S&P Global.

KPIs and balance sheet/cash flow

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• CEO on operational execution: “We are pleased we delivered financial results ahead of our expectations... Our team continues to execute well in a highly dynamic geopolitical and market environment” .
• CEO on tariffs and complexity: “Complexity is our friend… our job… is to minimize the complexity so our suppliers and customers can achieve their goals” .
• CFO on margins and mix: “Gross margin of 11.1% was 78 bps lower YoY but 54 bps higher sequentially in part due to a seasonal mix shift to the West” .
• CFO on EPS benefit: “Adjusted diluted EPS of $0.84… included an approximately $0.08 benefit from the gain on sale and leaseback” .
• CEO on Farnell trajectory: “We’re encouraged… goal is continuous improvement quarter-on-quarter to work our way back into double digit” .

Q&A Highlights

• Guidance vs suppliers: Management framed Q4 guidance as balanced, with upside largely from Asia while EMEA remains down >5% sequentially; expects additional inventory reduction of “$100M kind of plus” in Q4 .
• Inventory approach: Inventory is strategic; targeted reductions continue with focus on returns (ROWC/ROCE). Constant-currency inventories -$57M QoQ; progress is modest given demand .
• Tariffs impact: 7–10% of Americas sales are China-origin; ~30% of that goes to MX/CA (not subject to U.S. tariffs). FTZs buffer timing; tariffs are passed through, with mitigation via alternative country-of-origin and supplier collaboration .
• Farnell margin improvement: Sequential gains from cost actions and mix (on-the-board components); management aims for steady progress toward double-digit margins over time .
• AI exposure: Visibility primarily in Asia/Taiwan; ancillary products benefiting; estimated 3–5% of Asia Pac business tied to AI systems, with long-term tail expected at the edge .

Estimates Context

• Q3 FY2025 actuals beat S&P Global consensus: Revenue $5.315B vs $5.252B*; Adjusted EPS $0.84 vs $0.714*; 5 estimates for each metric* *. Values retrieved from S&P Global.
• Given Q4 guidance midpoint implies flat sequential sales and similar adjusted EPS midpoint ($0.70), estimates for EMEA may need modest downward revision, while Asia mix could lift unit volumes but dilute margins .

Key Takeaways for Investors

• Beat vs consensus on both revenue and EPS with stronger Asia and improving Farnell margins; watch for continuation of Asia momentum and Farnell margin uplift as catalysts * .
• Margin headwinds from Asia mix persist, but sequential gross margin improved; focus on higher-margin IP&E, embedded, and demand creation to support margin resilience .
• Inventory reduction remains a near-term execution focus; management targets further $100M+ reduction in Q4, supporting cash generation and leverage moderation .
• Tariff risk is being operationally mitigated; FTZ usage and routing to MX/CA limit cash flow drag; tariffs are passed through—limited P&L exposure near term .
• Capital returns continue: buybacks ahead of ≥5% annual reduction target; dividend maintained at $0.33, with healthy liquidity (~$1.2B capacity) .
• Near-term trading: potential positive reaction to consensus beat and Farnell progress; balanced by EMEA weakness and Asia-driven margin mix—watch FX and tariff headlines for volatility * .
• Medium-term thesis: scale, supply chain services, and digital/e-commerce improvements (Farnell and Avnet.com) should drive operating leverage as demand normalizes .

References: 8-K press release and exhibits ; AVT earnings press releases ; Q3 FY2025 earnings call transcript ; Q2 FY2025 call ; Dividend press release . Values retrieved from S&P Global where marked with *.