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Introduction & Market Context
Avnet Inc . (NASDAQ:AVT), a global electronic components distributor, released its third-quarter fiscal year 2025 financial results on April 30, 2025, revealing continued regional disparities in performance as the company navigates a challenging semiconductor market environment. The company reported revenue of $5.3 billion, down 6% year-over-year, with strong performance in Asia offsetting weakness in Western markets.
The results come amid a prolonged inventory correction in the semiconductor industry, with Avnet’s book-to-bill ratios approaching parity in the Americas and EMEA regions, suggesting potential stabilization in future quarters. The company’s stock closed at $51.24 on April 29, 2025, and was trading down 1.72% in pre-market activity following the earnings release.
Quarterly Performance Highlights
Avnet reported third-quarter revenue of $5.3 billion, representing a 6% year-over-year decline. Adjusted operating margin came in at 2.9%, while diluted EPS reached $1.01 and adjusted diluted EPS was $0.84, down 24% compared to the same period last year.
As shown in the following quarterly highlights slide, lead times have generally stabilized, while book-to-bill ratios show Asia at parity with the Americas and EMEA approaching parity:
The company’s performance represents a sequential decline from the second quarter, when Avnet reported revenue of $5.7 billion and adjusted EPS of $0.87. This downward trend reflects ongoing challenges in Western markets, though the Q3 revenue came in at the high end of the previously provided guidance range of $5.05-$5.35 billion.
Regional and Segment Analysis
Avnet’s regional performance showed significant divergence, with Asia growing 13% year-over-year while EMEA declined 24% and the Americas fell 9%. This regional disparity highlights the uneven nature of the current market recovery.
The detailed revenue breakdown reveals the extent of these regional differences and their impact on overall performance:
By business segment, Electronic Components revenue declined 6% year-over-year to $4.95 billion, while Farnell (the company’s high-service distribution business) saw a 10% decrease to $367 million. The constant currency figures show similar trends, with overall company revenue down 5% when adjusting for foreign exchange impacts.
Profitability and Margin Trends
Avnet’s gross margin reached 11.1% in the third quarter, benefiting from a seasonal mix shift toward Western regions. The company managed to reduce SG&A expenses by 7% year-over-year to $435 million, though SG&A as a percentage of gross profit increased from 69.8% in Q3 FY24 to 74.1% in Q3 FY25, indicating pressure on operational efficiency.
The following slide illustrates the key income statement highlights:
Adjusted operating income continued its downward trend, reaching $153 million in Q3 FY25, a 25% decrease from the same period last year. This decline was evident across both business segments, with Electronic Components adjusted operating income falling 21% and Farnell dropping 33%.
The five-quarter trend of declining adjusted operating income is clearly visible in this chart:
Interest expense improved to $61 million, down $12 million year-over-year and $1 million sequentially. However, this was not enough to offset the overall profitability decline, as adjusted diluted EPS fell to $0.84, a 24% decrease from $1.10 in the prior year period.
The EPS comparison is illustrated in the following slide:
Balance Sheet and Capital Allocation
Despite challenging market conditions, Avnet maintained its focus on balance sheet management and shareholder returns. Inventory stood at $5.3 billion, representing an $18 million increase quarter-over-quarter due to foreign exchange impacts, but a $57 million decrease when excluding these effects. This aligns with management’s previously stated focus on inventory optimization.
Working capital days increased slightly to 104 days, up 2 days sequentially. The company’s gross debt leverage ratio was 3.2x, with $1.2 billion in available committed lines of credit.
Avnet continued to return capital to shareholders, repurchasing $101 million worth of shares and paying a dividend of $0.33 per share, returning a total of $28 million to shareholders. The company’s diluted share count decreased from 91 million in Q3 FY24 to 87 million in Q3 FY25, reflecting the impact of the ongoing share repurchase program.
Forward-Looking Statements
Looking ahead to the fourth quarter of fiscal year 2025, Avnet provided guidance for sales between $5.15 billion and $5.45 billion, with a midpoint of $5.3 billion, suggesting flat sequential performance. Adjusted diluted EPS is expected to range from $0.65 to $0.75, with a midpoint of $0.70, indicating continued pressure on profitability.
The guidance reflects current market conditions and assumes flat sequential sales at the midpoint, with benefits from favorable foreign currency exchange rates, primarily in EMEA. On a constant currency basis, the company expects lower sales in EMEA and relatively flat sales in the Americas and Asia.
The detailed outlook is presented in the following slide:
The Q4 guidance represents a significant step down in adjusted EPS from the $0.84 reported in Q3, suggesting that challenges in the semiconductor market are expected to persist in the near term. This outlook aligns with industry expectations for a gradual recovery, with potential improvement in the late June or summer quarter as mentioned in previous communications.
As Avnet navigates through this challenging period, the company continues to focus on inventory optimization, cost management, and strategic initiatives to position itself for the eventual market recovery. The regional disparity in performance highlights both challenges and opportunities, with Asia representing a bright spot amid broader market weakness.
Full presentation:
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