Avnet (AVT) Q2 2026 earnings review
All Engines Firing: Western Recovery Joins Asia Strength
Avnet delivered a decisive beat-and-raise quarter, marking a complete turnaround from the cyclical lows. Revenue acceleration was broad-based: while Asia set a record with 17% growth, the critical development was the return to growth in the Americas (+5%) and EMEA (+8%). The standout operational victory was the Farnell segment, where margins surged to 4.7% from 1.0% a year ago. Management signaled strong momentum by guiding Q3 revenue to $6.35B (midpoint), implying 'better-than-typical' sequential growth.
🐂 Bull Case
The high-margin Farnell segment has ceased being a drag on earnings. Sales jumped 24% YoY, and operating margins expanded 370 basis points to 4.7%. This operational fix is adding significant leverage to the bottom line.
Avnet hit its target of reducing inventory days into the 80s (actual: 86 days), down from 92 last quarter. This discipline generated $208M in operating cash flow, reversing the cash burn from Q1.
🐻 Bear Case
Despite strong sales, Adjusted Operating Margin contracted slightly YoY (2.7% vs 2.8%). This reflects the 'geographic mix' problem: lower-margin Asia is growing faster (+17%) than higher-margin Western regions, diluting overall profitability.
While Adjusted EPS grew 21%, GAAP Net Income actually fell 29% YoY to $61.7M. This divergence is driven by restructuring charges ($25M) and a significantly higher tax rate, creating a 'messy' headline number.
⚖️ Verdict: 🟢🟢
Strong Bullish. The cyclical turn is confirmed. Avnet is no longer relying solely on Asia; the synchronized recovery across Americas and EMEA, combined with the rapid margin repair at Farnell, sets up a powerful earnings ramp for the second half of FY26.
Key Themes
Broad-Based Geographic Recovery
For the first time in several quarters, all three major regions posted YoY growth. EMEA (+8.3%) was a significant positive surprise after being guided 'flat' previously. Asia continues to dominate with record revenue of $3.2B (+17%), but the participation of Western markets improves the quality and stability of the revenue base.
Farnell Margin Breakout
Farnell has turned a corner. Operating margin exploded from 1.0% in 25Q2 to 4.7% in 26Q2. While sales volume (+24%) provided leverage, cost actions are clearly biting. This segment is critical because it historically carries higher margins than the core Electronic Components business.
Geographic Mix Pressure
The recovery is volume-heavy but margin-light. Asia now accounts for 50.2% of total sales (up from 47.9% last year). Because Asian distribution typically carries lower gross margins than the West, this mix shift is preventing the strong top-line growth (+11.6%) from fully translating into margin expansion (Adjusted Op Margin actually fell 10 bps YoY).
Restructuring Charges
The company incurred $25.2M in restructuring, integration, and other expenses in Q2, up significantly from $3.8M a year ago. While these are removed from 'Adjusted' figures, they are real cash costs impacting GAAP profitability and indicate ongoing friction in realigning the cost structure.
Working Capital Efficiency
Inventory days dropped to 86, hitting the sub-90 day target. Inventory absolute dollars fell $126M sequentially. This efficiency drove $208M in operating cash flow, a sharp reversal from the cash consumption seen in Q1, and funds the continued dividend and buyback program.
Macro: Lunar New Year Impact
Guidance for Q3 assumes 'less-than-typical sales decline in Asia driven by Lunar New Year.' This suggests underlying demand in Asia is strong enough to partially offset seasonal headwinds.
Other KPIs
Accelerating. Up 21% YoY and 25% sequentially. The sequential growth was nearly 4x the rate of sequential sales growth (7%), demonstrating strong operating leverage despite the geographic mix headwinds.
Stable. Down slightly from 3.4% YoY but up from 2.9% in Q1. This segment is the workhorse, and margins are stabilizing as volume returns.
Reversing. Returned to positive generation after a burn of -$145M in Q1. Driven by inventory reduction ($126M) and operational discipline.
Guidance
Accelerating. The midpoint ($6.35B) implies ~20% YoY growth (vs $5.3B in 25Q3) and ~1% sequential growth. This is 'better-than-typical' seasonality, confirming the cyclical upswing is gaining momentum.
Accelerating. Midpoint of $1.25 implies significant YoY growth vs $0.84 in 25Q3. It also implies continued margin expansion or leverage on the sales growth.
Key Questions
Farnell Margin Sustainability
Farnell margins jumped to 4.7% this quarter. Is this level sustainable given the 'competitive pricing pressures' mentioned in previous quarters, or was there a one-time mix benefit? What is the timeline to return to double-digit margins?
EMEA Demand Durability
EMEA revenue surprised to the upside (+8% YoY). Was this driven by specific end-market restocking, or is this a true demand signal? How does the order book look for Q3?
Restructuring Runway
Restructuring charges spiked to $25M this quarter. Are these actions largely complete, or should we expect elevated restructuring costs to persist through the second half of FY26?
AI Infrastructure Exposure
With the continued boom in data center build-outs, are you seeing an acceleration in orders for high-power interconnects and passive components specifically tied to AI servers?