Avnet Inc (AVT) Q3 2025 Earnings Report

Revenue: $5.315B in Q3 2025, down 5.98% YoY and 6.14% QoQ. Gross profit: $587.9M; gross margin 11.06%. Operating income: $143.3M; operating margin 2.70%. Net income: $87.9M; net income margin 1.65%. Diluted EPS: $1.01; GAAP EPS $1.02; adjusted EPS (per call) $0.84. YoY and QoQ metric trends reflect a milder YoY decline in Asia offset by Western weakness. Cash flow: operating cash flow $140.9M; capex $26.7M; free cash flow $114.1M. Balance sheet: total assets $11.71B; total liabilities $6.83B; total stockholders’ equity $4.88B; gross debt $2.83B; net debt $2.64B; gross leverage 3.2x. Liquidity and efficiency: current ratio 2.44x; days sales outstanding (DSO) 69.3 days; days inventory outstanding (DIO) 100.3 days; cash conversion cycle ~106.5 days. Revenue mix by operating group: Electronic Components down 6% YoY; Farnell down 10% YoY but up 6% QoQ; Asia +13% YoY; Europe (EMEA) and the Americas weaker versus prior year.

Key takeaways from Avnet’s Q3 FY2025 earnings call: 1) Strategy and execution: Management emphasized the Power of One framework, with growing contributions from Asia and Farnell—Asia up 13% YoY and Farnell sequentially up 6% with margins improving, suggesting successful operational tightening and SKU optimization. Phil Gallagher cited a disciplined approach to inventory, stating that inventory remains a strategic asset while core inventory levels will be reduced where needed. 2) Tariffs and macro uncertainty: Management described a dynamic tariff environment and detailed mitigation measures (global logistics footprint, alternative country-of-origin products, and importer-of-record strategies) to minimize impact and pass tariffs through where unavoidable. Ken Jacobson highlighted that 7–10% of annual Americas sales originate from China, with a portion re-routed through Mexico/Canada to avoid tariffs; no material working-capital drag observed to date, though the inventory remains the primary cash-flow lever. 3) Tariffs impact and AI tailwinds: Analysts received remarks on modest tariff-related pull-ins in Asia and a recognition that AI-related components/edge deployments are providing early, incremental tailwinds in Asia-Pacific markets, particularly Taiwan, contributing to a small but meaningful share of revenue growth in that region. 4) Guidance and uncertainty: The company reaffirmed Q4 guidance, underscoring FX support and Europe’s weaker trajectory, and indicated ongoing inventory optimization and capex discipline as catalysts for improved cash flow next quarter. Quotes from management underscoring confidence in the team, the “complexity is our friend” thesis, and commitment to returning capital through dividends and buybacks were repeated.

AVT’s story hinges on stabilization and tempo of destocking in the West combined with Asia/Farnell acceleration and tariff-mitigation effectiveness. The Q3 print demonstrates a resilient revenue base with Asia-led growth and meaningful progress in Farnell, supported by operational discipline and a hedge against tariff exposure via origin diversification and logistics leverage. The stock’s valuation near a mid-teen multiple on earnings, modest debt, and robust free cash flow provide a margin of safety, but investors should assign greater weight to the optionality embedded in Avnet’s service-based revenue streams and inventory correction trajectory. The key catalysts include (i) meaningful margin uplift from Farnell’s ongoing efficiency program, (ii) continued Asian growth and AI-tailwind opportunities, (iii) successful tariff mitigation that preserves gross margin and enables pricing discipline, and (iv) a constructive inventory unwind that improves working capital efficiency and cash generation. Risks include tariff policy escalation, Europe weakness, and macro headwinds that could delay the return to double-digit margins and a stronger cash conversion cycle.