Global electronics components and solutions distributor Arrow Electronics (NYSE: ARW) reported revenue ahead of Wall Street’s expectations in Q1 CY2026, with sales up 39% year on year to $9.47 billion. On top of that, next quarter’s revenue guidance ($9.45 billion at the midpoint) was surprisingly good and 7.9% above what analysts were expecting. Its non-GAAP profit of $5.22 per share was 83% above analysts’ consensus estimates.

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Company Overview

Founded as a single retail store, Arrow Electronics (NYSE: ARW) provides electronic components and enterprise computing solutions to businesses globally.

Revenue Growth

A company’s long-term performance is an indicator of its overall quality. Any business can have short-term success, but a top-tier one grows for years. Over the last five years, Arrow Electronics grew its sales at a sluggish 1.8% compounded annual growth rate. This fell short of our benchmarks and is a rough starting point for our analysis.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Arrow Electronics’s annualized revenue growth of 3.5% over the last two years is above its five-year trend, which is encouraging.

Arrow Electronics also breaks out the revenue for its most important segments, Components and ECS, which are 0.1% and 0% of revenue. Over the last two years, Arrow Electronics’s Components revenue (electronic component sales) averaged 13.8% year-on-year declines while its ECS revenue (computing solutions and services) averaged 5.6% declines.

This quarter, Arrow Electronics reported wonderful year-on-year revenue growth of 39%, and its $9.47 billion of revenue exceeded Wall Street’s estimates by 12.9%. Company management is currently guiding for a 24.7% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 6.4% over the next 12 months. Although this projection implies its newer products and services will spur better top-line performance, it is still below the sector average.

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Operating Margin

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Arrow Electronics was profitable over the last five years but held back by its large cost base. Its average operating margin of 4.1% was weak for an industrials business. This result isn’t too surprising given its low gross margin as a starting point.

Analyzing the trend in its profitability, Arrow Electronics’s operating margin decreased by 2 percentage points 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. Arrow Electronics’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers.

This quarter, Arrow Electronics generated an operating margin profit margin of 3.8%, up 1.5 percentage points year on year. The increase was encouraging, and because its operating margin rose more than its gross margin, we can infer it was more efficient with expenses such as marketing, R&D, and administrative overhead.

Earnings Per Share

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Arrow Electronics’s EPS grew at 8.3% compounded annual growth rate over the last five years, higher than its 1.8% annualized revenue growth. However, this alone doesn’t tell us much about its business quality because its operating margin didn’t improve.

Diving into Arrow Electronics’s quality of earnings can give us a better understanding of its performance. A five-year view shows that Arrow Electronics has repurchased its stock, shrinking its share count by 31.8%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Arrow Electronics, its two-year annual EPS declines of 1.5% mark a reversal from its five-year trend. We hope Arrow Electronics can return to earnings growth in the future.

In Q1, Arrow Electronics reported adjusted EPS of $5.22, up from $1.80 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 Arrow Electronics’s full-year EPS of $14.45 to shrink by 1.4%.

Key Takeaways from Arrow Electronics’s Q1 Results

We were impressed by Arrow Electronics’s optimistic EPS guidance for next quarter, which blew past analysts’ expectations. We were also glad its EPS outperformed Wall Street’s estimates. Zooming out, we think this was a solid print. The stock traded up 2.4% to $196.23 immediately following the results.

Arrow Electronics had an encouraging quarter, but one earnings result doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. 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).