Avnet (NASDAQ:AVT) Delivers Strong Q2 Numbers, Provides Optimistic Revenue Guidance for Next Quarter

Yahoo

06-08-2025

Electronic components distributor Avnet (NASDAQGS:AVT) reported Q2 CY2025 results beating Wall Street's revenue expectations , but sales were flat year on year at $5.62 billion. Guidance for next quarter's revenue was optimistic at $5.7 billion at the midpoint, 2.9% above analysts' estimates. Its non-GAAP profit of $0.81 per share was 12.5% above analysts' consensus estimates.
Is now the time to buy Avnet? Find out in our full research report.
Avnet (AVT) Q2 CY2025 Highlights:
Revenue: $5.62 billion vs analyst estimates of $5.38 billion (flat year on year, 4.5% beat)
Adjusted EPS: $0.81 vs analyst estimates of $0.72 (12.5% beat)
Adjusted EBITDA: $97.71 million vs analyst estimates of $155.7 million (1.7% margin, 37.2% miss)
Revenue Guidance for Q3 CY2025 is $5.7 billion at the midpoint, above analyst estimates of $5.54 billion
Adjusted EPS guidance for Q3 CY2025 is $0.80 at the midpoint, below analyst estimates of $0.90
Operating Margin: 1.3%, down from 3.4% in the same quarter last year
Free Cash Flow Margin: 1.4%, down from 4.5% in the same quarter last year
Market Capitalization: $4.35 billion
'In fiscal year 2025, we executed well given the overall market environment, and I want to express my gratitude to our team for their dedication in supporting our supplier and customer partners. Thanks to their efforts, we managed costs effectively and made progress on working capital optimization to enhance operating cash flow,' 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
Examining a company's long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but many enduring ones grow for years.
With $22.2 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. However, its scale is a double-edged sword because it's challenging to maintain high growth rates when you've already captured a large portion of the addressable market. To accelerate sales, Avnet likely needs to optimize its pricing or lean into new offerings and international expansion.
As you can see below, Avnet's 4.7% annualized revenue growth over the last five years was mediocre. This shows it couldn't generate demand in any major way and is a tough 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 performance shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 8.5% annually.
This quarter, Avnet's $5.62 billion of revenue was flat year on year but beat Wall Street's estimates by 4.5%. Company management is currently guiding for a 1.7% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 2.2% over the next 12 months. While 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
Avnet's operating margin might fluctuated slightly over the last 12 months but has generally stayed the same, averaging 3.4% 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 Q2, Avnet generated an operating margin profit margin of 1.3%, down 2.1 percentage points year on year. This contraction shows it was less efficient because its expenses increased relative to its revenue.
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 remarkable 11.2% compounded annual growth rate over the last five years, higher than its 4.7% 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 34.7% mark a reversal from its (seemingly) healthy five-year trend. We hope Avnet can return to earnings growth in the future.
In Q2, Avnet reported adjusted EPS at $0.81, down from $1.22 in the same quarter last year. Despite falling year on year, this print easily cleared analysts' estimates. Over the next 12 months, Wall Street expects Avnet's full-year EPS of $3.44 to grow 49.1%.
Key Takeaways from Avnet's Q2 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. On the other hand, its EPS guidance for next quarter missed. Overall, we think this was a solid quarter with some key areas of upside. Investors were likely hoping for more, and shares traded down 1.3% to $51.20 immediately after reporting.
Big picture, is Avnet a buy here and now? If you're making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it's free.