stockrowWhat it does
Avnet is a global distributor of electronic components and a provider of technology and supply-chain services. It connects component manufacturers with businesses that use those parts to design and build products. Founded in 1921 and headquartered in Phoenix, Avnet is led by Chief Executive Officer Philip Gallagher.
The company has two operating groups. Electronic Components serves mainly medium- and high-volume customers, distributing semiconductors and other components used in electronic products. It also helps customers choose parts, design products, manage inventory, and arrange warehousing and delivery. Its embedded and integrated solutions activities include designing and assembling products and systems for customer requirements.
Farnell primarily serves customers that need smaller quantities of components quickly for development, prototyping and testing. It sells components, kits, tools, industrial automation products, and test and measurement equipment, primarily through e-commerce. Farnell also distributes new product introductions for suppliers.
Customers range from startups and mid-sized businesses to large equipment manufacturers, electronics manufacturing services providers and original design manufacturers. They use Avnet’s products and services across markets including industrial, automotive, defense, aerospace and healthcare. Avnet operates in the Americas, Europe, the Middle East and Africa, and Asia, serving customers in more than 140 countries.
How it makes money
Avnet earns revenue primarily by selling electronic components and related products to customers. Its Electronic Components group markets and distributes semiconductors, interconnect, passive and electromechanical components, and other integrated and embedded products. It also offers design, programming, logistics and post-sales services. Its supply-chain services include procurement support, warehousing and logistics; some engagements generate services revenue rather than substantial product sales.
Farnell sells smaller quantities of components, tools and equipment, primarily online. Its customers can purchase parts for early design and testing work, while Electronic Components supports customers with medium- and high-volume needs. Farnell’s product mix includes single-board computers and test and measurement products as well as semiconductors and other components.
Total sales were $27.63 billion in fiscal 2026 and $10.7 billion in the first quarter of fiscal 2027.
Gross profit depends on sales volume, pricing, product and customer mix, and geographic mix. Fiscal 2026 gross margin was 10.4%; Electronic Components’ margin declined partly because Asia accounted for a higher mix of its sales. Farnell’s gross margin increased as on-the-board electronic components accounted for a higher mix.
In the first quarter of fiscal 2027, Avnet attributed approximately 1/3 of both sequential and year-over-year sales growth to memory price increases. Growth in Integrated Solutions reduced the Electronic Components gross margin because that business had a lower gross margin than the group average, while contributing to operating margin expansion. The company’s customers make purchases across product life cycles, but the amounts and timing depend on demand and ordering patterns.
Customers and how it sells
Avnet serves startups, mid-sized businesses and enterprise-level customers, including original equipment manufacturers, electronics manufacturing services providers and original design manufacturers. Electronic Components primarily supports medium- and high-volume buyers, while Farnell serves engineers and entrepreneurs who need smaller quantities for development, prototyping and testing.
Farnell distributes primarily through e-commerce. Electronic Components combines product distribution with design assistance, procurement, inventory management and logistics. Customers can use these services locally, regionally or globally. Avnet Integrated Solutions also supports software companies bringing their intellectual property to market through hardware, including custom-built servers.
Both operating groups have operations in the Americas, Europe, the Middle East and Africa, and Asia. Avnet serves customers in more than 140 countries. Approximately 78% of fiscal 2026 sales came from operations outside the United States. In the first quarter of fiscal 2027, Asia represented 48% of total sales.
Avnet has identified demand from customers serving enterprise, hyperscale and new cloud data centers. It has also described expanding supply-chain services engagements in data center infrastructure, networking and transportation. Other markets served include industrial, automotive, defense, aerospace, healthcare and telecommunications.
Suppliers and costs
Avnet works with electronic component manufacturers across major component categories and distributes their products to customers. Products from one supplier accounted for over 10% of consolidated sales in fiscal year 2026; that supplier is not named in the business description. Avnet purchases most products under franchised distribution agreements, which typically provide some protection against obsolescence and price erosion. Those agreements are generally cancelable upon 30 to 180 days’ notice.
The company also develops and produces standard boards, industrial subsystems and application-specific devices, and provides integration and assembly services. Its distribution model requires inventory, warehousing, logistics, information systems and employees. Fiscal 2026 cost of sales was $24.8 billion, substantially all related to inventory purchases, and selling, general and administrative expenses were $2.02 billion.
Inventory purchases and receivables require funding as sales grow. Avnet used $280.9 million in operating activities during fiscal 2026, primarily reflecting working-capital needs. In the first quarter of fiscal 2027, it increased debt to support working-capital investment. The company also faces freight costs, financing costs and exposure to supplier price changes.
- Revenue$27.6B
- Cost of revenue−$24.8B
- Selling, general and administrative−$2.0B
- Other operating costs−$134.7M
- Operating income$724.8M
Competitive position
The electronic components distribution market is competitive. Electronic Components’ major competitors include Arrow Electronics, Future Electronics, World Peace Group and WT Microelectronics. Farnell’s major competitors include Mouser Electronics, Digi-Key Electronics and RS Components. Smaller specialists also compete in particular sectors, locations, markets or products. Avnet must keep its prices, product selection and availability competitive.
Inventory is a competitive factor because customers need a sufficient selection of parts delivered to their requirements. Avnet carries products from many suppliers, allowing customers to consolidate component purchases rather than buy from several parties. It also offers services tailored to customers, including design support, testing, assembly, programming and supply-chain management.
Our reading: The broad supplier line card is a meaningful source of customer convenience, although competitors can contest selection, availability and price. Our reading: Design and supply-chain services can deepen customer relationships, but the evidence does not establish how difficult those relationships are for rivals to replace. Our reading: Inventory and global logistics help Avnet serve varied delivery needs, while requiring capital and exposing it to products losing value.
Farnell’s online distribution and involvement in early product design give Avnet a way to reach engineers before products move to higher volumes. Avnet also serves larger-volume requirements through Electronic Components.
| Competitor | Where they compete | Threat (our reading) |
|---|---|---|
| Arrow Electronics | Electronic Components distribution | High |
| Future Electronics | Electronic Components distribution | High |
| World Peace Group | Electronic Components distribution | High |
| WT Microelectronics | Electronic Components distribution | High |
| Mouser Electronics | Farnell’s component distribution market | High |
| Digi-Key Electronics | Farnell’s component distribution market | High |
| RS Components | Farnell’s component distribution market | High |
Growth opportunities
Avnet’s growth opportunities include supplying components for industrial, transportation, aerospace and defense, networking, and data center applications. The company also provides design and supply-chain support to customers building more complex products. Through Farnell, it reaches engineers during design and prototyping; Electronic Components can support medium- and high-volume requirements.
Fiscal 2026 sales increased 24.5% from fiscal 2025, with growth across all Electronic Components regions and Farnell. Electronic Components’ increase was mainly attributable to higher sales volumes and a mix of higher-priced components. Farnell’s increase was primarily driven by improved demand for single-board computers and on-the-board components.
In the first quarter of fiscal 2027, sales increased 82% year-over-year. The quarter had 14 weeks compared with a typical 13-week quarter; excluding the extra week, sales grew 71% year-over-year. Avnet attributed approximately 1/3 of year-over-year sales growth to memory price increases.
The company is expanding supply-chain services engagements, particularly with customers in data center infrastructure, networking and transportation. It also sees demand from customers serving enterprise, hyperscale and new cloud data centers. Avnet expects second-quarter fiscal 2027 sales of $11.1 billion to $11.4 billion, assuming current market conditions and electronic component availability, including memory availability, persist.
- $24.3BFY2022
- $26.5BFY2023
- $23.8BFY2024
- $22.2BFY2025
- $27.6BFY2026
Structural risks
- Inventory and working capital: Components can decline in value or become obsolete as technology, customer needs and industry standards change. Supplier agreements provide some protections, but some purchase orders may be non-cancellable or non-returnable. Growth also requires cash for inventory and receivables.
- Supplier relationships and availability: Products from one supplier represented over 10% of fiscal 2026 consolidated sales. Avnet’s distribution agreements are generally cancelable on notice. Lead times extended across most semiconductor and interconnect, passive and electromechanical categories in the first quarter of fiscal 2027.
- International operations: Approximately 78% of fiscal 2026 sales came from operations outside the United States. Trade restrictions, tariffs, currency movements, political instability and shipping disruptions can affect the business.
- Competition and changing demand: Pricing, product selection and availability must remain competitive. Changes in customer product demands and consumption models can reduce billings, while technological advances and new competitors can alter the market.
- Systems and financing: Avnet depends on information systems and centralized distribution centers. Cybersecurity threats include phishing and ransomware. Its financing agreements contain covenants and restrictions that can limit activities under certain circumstances.
Bottom line
Our reading
Our reading: Avnet is a component distributor whose supplier relationships, inventory and services connect product makers with customers ranging from engineers to large manufacturers. Its growth depends on demand and pricing across electronic-component markets, while funding inventory and receivables can absorb cash as sales rise. Broad geographic reach creates opportunities across markets but also exposes the business to trade, currency and logistics disruptions.