Arrow Electronics, Inc. Q4 FY2025 earnings call

• Strong fourth quarter with revenue up 20% y/y and non-GAAP EPS up 48% y/y. • Global components demand gradually recovering from cyclical correction; ECS had record gross and operating profit in Q4. • Leading indicators improving: book-to-bill and backlog increasing, lead times extending. • Strategic mix shift translating to higher quality results with value-added offerings and ECS performing well. • Investment thesis pillars: leading position in large markets, differentiated capabilities for profitable growth, diversified business model for financial flexibility, focused capital allocation to maximize shareholder value. • ECS business moving beyond transactional distribution, recognized as Microsoft's 2025 Distributor Partner of the Year for ArrowSphere AI offerings.

In full year 2025, consolidated revenue was $30.9 billion, up 10% year-over-year (9% constant currency). Global components revenue increased 8% constant currency, while ECS revenue was up 15% constant currency. For the fourth quarter, global components sales increased $1.1 billion year-over-year to $5.9 billion, up 6% sequentially. ECS sales increased $400 million year-over-year to $2.9 billion, up 16% year-over-year. Global components contribute a portion of the revenue, with ECS also making significant contributions. Revenue contribution details: global components had an 8% constant currency growth, ECS 15% constant currency growth in full year 2025; fourth quarter global components sales were $5.9B, ECS $2.9B.

• Q1 sales expected between $7.95 billion and $8.55 billion, up 21% y/y midpoint. • Global components sales expected $5.75 billion to $6.15 billion, sequential growth 1% midpoint. • ECS sales expected $2.2 billion to $2.4 billion, up 13% y/y midpoint. • 2026 recovery gradual due to inventory normalization, macro and geopolitical instability creating uncertainty. • Q1 global components expected above seasonal trends in all regions; Q2 Asia seasonally strong.

• Inventory normalization throughout the supply chain still in progress. • Macro and geopolitical instability creating uncertainty, affecting market complexion by region, market, and customer type.

Q: Comment on billing linearity and booking patterns through the fourth quarter.

A: Rajesh Agrawal said nothing unusual, largely aligned with expectations; ECS had largest quarter in Q4 as expected, components business building momentum, all regions ahead of normal seasonality.

Q: In global components, details on Americas region sales and ECS growth in EMEA, and sustainment into H2 2026.

A: Rajesh Agrawal said no particular thing to call out in regions, healthy backlog build; Richard Marano added gradual, consistent build in backlog tied to industrial, mil/aero markets; Bill Austen mentioned more industrial activity in West in Q4; Eric Nowak talked about ECS hardware being 25% of revenue, mostly storage, compute, networking, security; Richard Marano said value-added services are extension of existing business, confident in capabilities.

Q: On working capital investment, interest expense, and seasonality in end markets.

A: Rajesh Agrawal said interest expense lower than expected due to cash position, debt paydown, timing of working capital; short-term rates lower mitigating interest expense; William Austen said visibility not clear beyond 90 days, Q1 expected above seasonal in all regions