Electronic components distributor Avnet (NASDAQGS:AVT) announced better-than-expected revenue in Q4 CY2025, with sales up 11.6% year on year to $6.32 billion. On top of that, next quarter’s revenue guidance ($6.35 billion at the midpoint) was surprisingly good and 7.9% above what analysts were expecting. Its non-GAAP profit of $1.05 per share was 10.2% above analysts’ consensus estimates.

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“We delivered year-over-year sales growth across all of our Electronic Components regions and Farnell, and both total Company revenue and earnings per share were above our expectations. Sequentially, our adjusted operating income grew two times faster than sales, demonstrating the expected leverage in our business model. Our team’s continued commitment to optimizing inventory and driving operational excellence also enabled us to generate operating cash flow and reduce days of inventory this quarter,” said Avnet Chief Executive Officer Phil Gallagher.

Company Overview

With a century-long history of adapting to technological evolution, Avnet (NASDAQ: AVT) is a global electronic components distributor that connects manufacturers of semiconductors and other electronic parts with businesses that need these components.

Revenue Growth

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years.

With $23.15 billion in revenue over the past 12 months, Avnet is a behemoth in the business services sector and benefits from economies of scale, giving it an edge in distribution. This also enables it to gain more leverage on its fixed costs than smaller competitors and the flexibility to offer lower prices.

As you can see below, Avnet’s 5.3% annualized revenue growth over the last five years was decent. This shows its offerings generated slightly more demand than the average business services company, a useful starting point for our analysis.

Long-term growth is the most important, but within business services, a half-decade historical view may miss new innovations or demand cycles. Avnet’s recent performance marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 4.9% over the last two years.

This quarter, Avnet reported year-on-year revenue growth of 11.6%, and its $6.32 billion of revenue exceeded Wall Street’s estimates by 4.9%. Company management is currently guiding for a 19.5% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 6.3% over the next 12 months, an improvement versus the last two years. This projection is above average for the sector and suggests its newer products and services will spur better top-line performance.

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Operating Margin

Avnet’s operating margin might fluctuated slightly over the last 12 months but has generally stayed the same, averaging 3.6% over the last five years. This profitability was lousy for a business services business and caused by its suboptimal cost structure.

Looking at the trend in its profitability, Avnet’s operating margin might fluctuated slightly but has generally stayed the same over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

In Q4, Avnet generated an operating margin profit margin of 2.3%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Avnet’s EPS grew at a spectacular 13.7% compounded annual growth rate over the last five years, higher than its 5.3% annualized revenue growth. However, this alone doesn’t tell us much about its business quality because its operating margin didn’t improve.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Avnet, its two-year annual EPS declines of 29.2% mark a reversal from its (seemingly) healthy five-year trend. We hope Avnet can return to earnings growth in the future.

In Q4, Avnet reported adjusted EPS of $1.05, up from $0.87 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Avnet’s full-year EPS of $3.54 to grow 56.8%.

Key Takeaways from Avnet’s Q4 Results

We were impressed by Avnet’s optimistic revenue guidance for next quarter, which blew past analysts’ expectations. We were also glad its revenue outperformed Wall Street’s estimates. Zooming out, we think this was a solid print. The stock traded up 3.7% to $54.62 immediately after reporting.

Avnet may have had a good quarter, but does that mean you should invest right now? What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here (it’s free).