Avnet, Inc. Q2 FY2026 earnings call

• Phil Gallagher mentioned the company delivered financial results exceeding sales and EPS guidance, with strong demand in compute and aerospace/defense. Lead times are trending higher, driven by data center and AI, with customer orders within and beyond lead times creating opportunity. - Highlights of Electronic Components: Asia's record sales, EMEA's recovery, Americas' growth, and growth in demand creation and IP&E. - Farnell: Sales growth across regions, operating margins improving, with expectation of further margin improvement as onboard components recover

Electronic Components business achieved sales of $6.3 billion in the second quarter, with a 3.2% operating margin. Farnell business had a 4.7% operating margin. Electronic Components sales grew 11% year-over-year and 7% sequentially; Farnell sales grew 24% year-over-year and 7% sequentially. Asia saw sales reach a record high of over $3 billion, marking the sixth consecutive quarter of year-on-year sales growth. EMEA showed signs of recovery with sequential and year-on-year sales growth. Americas had sequential and year-on-year sales growth. EC's demand creation revenues increased 7% sequentially, and IP&E business had double-digit year-on-year growth. Farnell sales grew sequentially and year-on-year, with operating margins improving and expected further improvement as onboard components recover

For 2026, sales are guided in the range of $6.2 billion to $6.5 billion and diluted EPS in the range of $1.20 to $1.30. Third quarter guidance implies a sequential sales increase of approximately 1% at the midpoint, sales growth in The Americas and EMEA, less than seasonal sales decline in Asia due to Lunar New Year, further recovery in higher margin Western regions, similar interest expense to the second quarter, an effective tax rate between 21% and 25%, and 83 million shares outstanding on a diluted basis

Forward-looking statements involve risks and uncertainties. Demand signals reset globally causing lead times to trend higher. Pricing environment has seen spot price increases with some suppliers and commodities, suggesting potential upward pricing pressure. Factors in Avnet's most recent Form 10-Q and 10-K could cause actual results to differ from forward-looking statements

Q: Talk about the linearity of orders during the quarter and the duration of the backlog.

A: The December quarter has bookings tail off near the end but billings continue; suppliers want backlog and customers are giving more visibility but not at the desired level.

Q: On pricing inflation in certain product categories.

A: Spot price increases in memory, storage, controllers, capacitors, etc., with contracted customers passing on price and spot buys increasing margins.

Q: On Europe recovery impact on Farnell margins.

A: Europe's recovery can accelerate Farnell margins, expecting incremental improvement of 50 basis points quarter on quarter and potentially more as Europe recovers