Electronic components distributor Avnet (NASDAQGS:AVT) announced better-than-expected revenue in Q1 CY2026, with sales up 33.9% year on year to $7.12 billion. On top of that, next quarter’s revenue guidance ($7.45 billion at the midpoint) was surprisingly good and 12.6% above what analysts were expecting. Its non-GAAP profit of $1.48 per share was 12.3% above analysts’ consensus estimates.

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“Sales and earnings exceeded our expectations, with double-digit sales growth both sequentially and year over year. Our team is executing well, driving improved operating margins and leverage, supported by continued disciplined cost management and inventory optimization. The investments we have made in our capabilities and digital infrastructure are paying off,” 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 experience short-term success, but top-performing ones enjoy sustained growth for years.

With $24.96 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.

As you can see below, Avnet’s 6.2% annualized revenue growth over the last five years was decent. This shows its offerings generated slightly more demand than the average business services company, a useful 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 recent performance shows its demand has slowed as its revenue was flat over the last two years.

This quarter, Avnet reported wonderful year-on-year revenue growth of 33.9%, and its $7.12 billion of revenue exceeded Wall Street’s estimates by 10.3%. Company management is currently guiding for a 32.6% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 8% over the next 12 months, an improvement versus the last two years. This projection is particularly healthy for a company of its scale and implies its newer products and services will catalyze better top-line performance.

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Adjusted Operating Margin

Adjusted 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 because it excludes non-recurring expenses, interest on debt, and taxes.

Avnet’s adjusted operating margin has generally stayed the same over the last 12 months, averaging 3.6% over the last five years. This profitability was lousy for a business services business and caused by its suboptimal cost structure.

Analyzing the trend in its profitability, Avnet’s adjusted 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 Q1, Avnet generated an adjusted operating margin profit margin of 2.9%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.

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.

Avnet’s EPS grew at 13.5% compounded annual growth rate over the last five years, higher than its 6.2% annualized revenue growth. However, this alone doesn’t tell us much about its business quality because its adjusted 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 17.7% mark a reversal from its (seemingly) healthy five-year trend. We hope Avnet can return to earnings growth in the future.

In Q1, Avnet reported adjusted EPS of $1.48, up from $0.84 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 Avnet’s full-year EPS of $4.18 to grow 51.3%.

Key Takeaways from Avnet’s Q1 Results

We were impressed by how significantly Avnet blew past analysts’ EPS guidance for next quarter expectations this quarter. We were also excited its revenue outperformed Wall Street’s estimates by a wide margin. Zooming out, we think this was a solid print. The stock traded up 8.5% to $84.96 immediately after reporting.

Avnet put up rock-solid earnings, but one quarter doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here (it’s free).