Core Insights - Arrow Electronics reported revenue of $7.58 billion for the quarter ended June 2025, a 10% year-over-year increase, with an EPS of $2.43 compared to $2.78 a year ago, exceeding Zacks Consensus Estimate by 6.16% [1] - The company delivered an EPS surprise of 19.7%, with the consensus EPS estimate being $2.03 [1] Financial Performance - Revenue from the Americas was $2.76 billion, surpassing the estimated $2.57 billion [4] - EMEA revenue was $2.67 billion, exceeding the $2.56 billion estimate, with ECS sales at $1.24 billion, significantly up by 38.5% year-over-year [4] - Asia components sales reached $2.15 billion, above the estimated $1.96 billion, marking a 6.5% year-over-year increase [4] - Global ECS net sales were $2.3 billion, exceeding the $2.06 billion estimate, reflecting a 23.3% year-over-year change [4] - Global components net sales were $5.28 billion, compared to the $5.08 billion estimate, indicating a 5% year-over-year increase [4] Market Performance - Arrow Electronics shares returned -1.6% over the past month, while the Zacks S&P 500 composite increased by 2.7% [3] - The stock currently holds a Zacks Rank 3 (Hold), suggesting it may perform in line with the broader market in the near term [3]

Core Viewpoint - Arrow Electronics reported quarterly earnings of $2.43 per share, exceeding the Zacks Consensus Estimate of $2.03 per share, but down from $2.78 per share a year ago, indicating an earnings surprise of +19.70% [1][2] Financial Performance - The company achieved revenues of $7.58 billion for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 6.16% and up from $6.89 billion year-over-year [2] - Over the last four quarters, Arrow Electronics has consistently surpassed consensus EPS estimates [2] Stock Performance - Arrow Electronics shares have increased approximately 14.7% since the beginning of the year, outperforming the S&P 500's gain of 8.2% [3] Future Outlook - The company's earnings outlook will be crucial for assessing future stock performance, with current consensus EPS estimates at $2.56 for the coming quarter and $10.14 for the current fiscal year [4][7] - The estimate revisions trend for Arrow Electronics was mixed ahead of the earnings release, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market [6] Industry Context - The Electronics - Parts Distribution industry, to which Arrow Electronics belongs, is currently ranked in the bottom 13% of over 250 Zacks industries, suggesting potential challenges ahead [8]

[Arrow Electronics Q2 2025 Earnings Release](index=1&type=section&id=Arrow%20Electronics%20Reports%20Second-Quarter%202025%20Results) [Financial Highlights](index=1&type=section&id=Financial%20Highlights) The company reported strong Q2 2025 results with sales and GAAP EPS exceeding guidance, though non-GAAP results declined - **Consolidated sales, segment sales, and earnings per share all surpassed the high end of the company's guidance** for Q2 2025[2](index=2&type=chunk)[3](index=3&type=chunk) Consolidated Financial Results (Q2 2025 vs Q2 2024) | (in millions except per share data) | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | **Consolidated sales** | $7,580 | $6,893 | 10% | | **Net income attributable to shareholders** | $188 | $109 | 73% | | **Net income per diluted share** | $3.59 | $2.01 | 79% | | **Non-GAAP net income attributable to shareholders** | $127 | $150 | (15)% | | **Non-GAAP net income per diluted share** | $2.43 | $2.78 | (13)% | - Changes in foreign currencies had a positive year-over-year impact, increasing sales by approximately **$123.3 million** and diluted EPS by **$0.07**[4](index=4&type=chunk) [Business Segment Performance](index=1&type=section&id=Business%20Segment%20Performance) Both Global Components and Global ECS segments reported sales above guidance, with ECS showing particularly strong top-line growth [Global Components](index=1&type=section&id=Global%20Components) The Global Components segment sales grew 5% year-over-year, driven by the Americas and Asia, despite a decline in operating income - The company observed sequential growth across all three operating regions, and leading indicators suggest a **modest cyclical recovery is in progress**[5](index=5&type=chunk) Global Components Financials (Q2 2025 vs Q2 2024) | (in millions) | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | **Global components sales** | $5,285 | $5,032 | 5% | | **Global components operating income** | $187 | $210 | (11)% | | **Global components non-GAAP operating income** | $189 | $218 | (13)% | - Regional Sales Performance (YoY): - Americas: **+9%** - Asia-Pacific: **+6%** - EMEA: **-1%** (-6% in constant currency)[5](index=5&type=chunk) [Global Enterprise Computing Solutions (ECS)](index=2&type=section&id=Global%20Enterprise%20Computing%20Solutions) The Global ECS segment delivered robust 23% year-over-year sales growth, fueled by strong performance in EMEA and its Arrowsphere platform - The company saw year-over-year growth in billings and gross profit, with **robust growth in its IT as-a-service backlog** and continued adoption of its digital platform, Arrowsphere[7](index=7&type=chunk) Global ECS Financials (Q2 2025 vs Q2 2024) | (in millions) | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | **Global ECS sales** | $2,295 | $1,861 | 23% | | **Global ECS operating income** | $97 | $103 | (5)% | | **Global ECS non-GAAP operating income** | $98 | $104 | (6)% | - Regional Sales Performance (YoY): - EMEA: **+39%** (+31% in constant currency) - Americas: **+9%**[8](index=8&type=chunk) [Other Financial Information](index=2&type=section&id=Other%20Financial%20Information) The company improved operational efficiency, enhanced returns on capital, and continued its share repurchase program in Q2 2025 - Key operational improvements in Q2 include **increased inventory turns, a reduced cash conversion cycle, and improved returns on capital**[9](index=9&type=chunk) - The company repurchased **$50 million** of its shares during the second quarter[9](index=9&type=chunk) [Third-Quarter 2025 Outlook](index=3&type=section&id=Third-Quarter%202025%20Outlook) The company projects Q3 2025 consolidated sales between $7.30 billion and $7.90 billion and non-GAAP EPS of $2.16 to $2.36 Q3 2025 Guidance | Metric | Q3 2025 Outlook | | :--- | :--- | | **Consolidated sales** | $7.30B - $7.90B | | - Global components sales | $5.30B - $5.70B | | - Global ECS sales | $2.00B - $2.20B | | **GAAP diluted EPS** | $1.49 - $1.69 | | **Non-GAAP diluted EPS** | $2.16 - $2.36 | | **Interest expense** | Approx. $65M | | **Average tax rate** | 23% - 25% | - Foreign currency changes are expected to increase Q3 2025 sales by approximately **$135 million** and diluted EPS by **$0.11** compared to Q3 2024[15](index=15&type=chunk) [Financial Statements](index=7&type=section&id=Financial%20Statements) The financial statements show increased sales but lower operating income, with a significant use of cash from operations [Consolidated Statements of Operations](index=7&type=section&id=Consolidated%20Statements%20of%20Operations) Sales rose 10% year-over-year, but operating income declined, while a large gain on investments boosted net income Q2 2025 Statement of Operations Highlights (in thousands) | Line Item | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Sales | $7,579,947 | $6,892,868 | | Gross Profit | $848,657 | $846,444 | | Operating Income | $190,586 | $212,275 | | Gain on investments, net | $103,976 | $(4,615) | | Net income attributable to shareholders | $187,749 | $108,698 | [Consolidated Balance Sheets](index=8&type=section&id=Consolidated%20Balance%20Sheets) Total assets grew to $24.3 billion, driven by a significant increase in accounts receivable and a corresponding rise in liabilities Balance Sheet Highlights (in thousands) | Line Item | June 28, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | **Total current assets** | $20,846,420 | $18,401,413 | | Accounts receivable, net | $15,271,349 | $13,030,991 | | Inventories | $4,749,431 | $4,709,706 | | **Total assets** | $24,252,578 | $21,757,707 | | **Total current liabilities** | $14,978,258 | $12,636,162 | | Accounts payable | $13,213,323 | $11,047,470 | | **Total shareholders' equity** | $6,333,890 | $5,761,151 | [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) The company experienced a significant negative swing in operating cash flow, primarily due to a large increase in accounts receivable Q2 2025 Cash Flow Highlights (in thousands) | Line Item | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net cash (used for) provided by operating activities | $(205,896) | $320,181 | | Net cash provided by (used for) investing activities | $106,240 | $(20,788) | | Net cash used for financing activities | $(73,832) | $(317,247) | | Net decrease in cash and cash equivalents | $(9,912) | $(29,801) | [Supplemental and Non-GAAP Information](index=12&type=section&id=Supplemental%20and%20Non-GAAP%20Information) This section reconciles GAAP to non-GAAP metrics, adjusting for items like amortization and restructuring to clarify core performance - Management uses non-GAAP financial measures to better assess operating performance by excluding items like **intangible amortization, restructuring charges, and foreign currency impacts**[19](index=19&type=chunk)[21](index=21&type=chunk) Q2 2025 GAAP to Non-GAAP Reconciliation Highlights (in millions) | Metric | GAAP | Adjustments | Non-GAAP | | :--- | :--- | :--- | :--- | | Operating income | $190.6 | $24.8 | $215.4 | | Net income attributable to shareholders | $187.7 | $(60.4) | $127.4 | | Net income per diluted share | $3.59 | $(1.16) | $2.43 | - Global ECS Gross Billings, a key operational metric, **increased 15% year-over-year** to $5.14 billion in Q2 2025[35](index=35&type=chunk)

Arrow Electronics (ARW) Conference Call Summary Industry Overview - The semiconductor cycle has been one of the longest and most profound in recent history, with indications that the bottom has been reached and recovery is underway [5][6] - Leading indicators such as book-to-bill ratios are above parity across all regions, and backlogs are building, providing improved visibility [6][12] Company Insights Business Segments - Arrow Electronics operates in two main segments: Global Components and Enterprise Computing Solutions (ECS) [9] - The inventory correction phase is largely behind, with some pockets of excess inventory remaining [12] - The ECS segment focuses on cloud, hybrid cloud, and infrastructure software, targeting mid-market customers [48] Financial Performance - The company has seen growth in gross profit (GP) and operating income (OI) over the last three quarters, with expectations for continued growth [50] - Recurring revenue in the ECS business is approaching one-third of total volume, contributing positively to margins [53] Competitive Advantages - Arrow's competitive edge lies in its vast supply chain assets and engineering capabilities, allowing it to serve large multinationals and mass markets effectively [22][24] - The company has invested in value-added services, enhancing its market position beyond traditional distribution [25][29] Market Trends Demand by Region and Vertical - Key verticals include industrial, transportation (including automotive), and aerospace and defense, with varying demand trends across regions [18][19] - Asia, particularly China, is leading the recovery, impacting regional margins [19][20] Tariff Impact - Tariffs have a minimal impact on Arrow's top and bottom lines, estimated at 2-4% of global component sales, and are viewed as neutral overall [38][39] - The company is actively helping customers navigate tariff implications and optimize their supply chains [44][46] Margin Outlook - Operating margins are expected to improve as the market normalizes, driven by scale, return of mass market demand, and growth in value-added offerings [31][33] - The ECS segment's margin profile is stable, with expectations for gradual improvement as recurring revenue grows [56] Investment Thesis - Arrow Electronics is aligned with attractive end markets with healthy growth potential, aiming to grow at or above market rates [59] - The company prioritizes organic growth, selective M&A, and capital returns, with a focus on enhancing shareholder value [60] Conclusion - Arrow Electronics is positioned for recovery and growth, with a clear strategy to leverage its competitive advantages and navigate market challenges effectively [61]

Core Insights - Arrow Electronics' international operations are crucial for understanding its financial resilience and growth potential [1][2] - The company's reliance on international markets influences its earnings durability and growth capabilities [2][3] Revenue Performance - Total revenue for the recent quarter reached $6.81 billion, a decline of 1.6% year-over-year [4] - EMEA contributed $2.47 billion, accounting for 36.20% of total revenue, with a surprise increase of +15.23% compared to expectations [5] - Asia Pacific generated $1.87 billion, representing 27.43% of total revenue, with a surprise of +3.85% over consensus estimates [6] Future Revenue Forecasts - Analysts project total revenue of $7.18 billion for the current fiscal quarter, reflecting a 4.1% increase year-over-year, with EMEA expected to contribute 35.7% and Asia Pacific 28.5% [7] - For the full year, total revenue is anticipated to be $28.46 billion, indicating a rise of 1.9% from the previous year, with EMEA at 36.4% and Asia Pacific at 28.9% [8] Market Dynamics - The reliance on global markets presents both opportunities and challenges for Arrow Electronics, making the analysis of international revenue trends essential for forecasting future performance [9][10] - Financial analysts are closely monitoring international developments to refine earnings estimates, which are influenced by various factors including local market status [10] Stock Performance - Arrow Electronics' stock has increased by 21.8% over the past month, outperforming the Zacks S&P 500 composite's 9.1% rise [13] - Over the past three months, the company's shares gained 11.6%, contrasting with a 3.1% decline in the S&P 500 [13]

Core Viewpoint - The global semiconductor sales continue to grow in Q1 2025, but there is a significant performance divergence among major chip manufacturers, influenced by market and product differences, particularly in AI and storage sectors, while automotive chip manufacturers are struggling [1]. Chip Design (Including IDM) - Texas Instruments (TI) reported Q1 revenue of $4.07 billion, a year-over-year increase of 11% and a sequential increase of 2%. The company expects Q2 revenue between $4.17 billion and $4.53 billion [3]. - STMicroelectronics (ST) reported Q1 revenue of $2.52 billion, a year-over-year decline of 27.3%, with a net profit of $56 million, down 89.1% [5]. - NXP's Q1 revenue was $2.84 billion, down 9% year-over-year, with a significant decline in automotive market revenue [6]. - Qualcomm's Q1 revenue reached $10.98 billion, a year-over-year increase of 16.9%, driven by growth in mobile, automotive, and IoT sectors [8]. - MediaTek's Q1 revenue was NT$153.31 billion, up 14.9% year-over-year, exceeding operational targets due to increased market demand [9]. Semiconductor Manufacturing - TSMC's Q1 revenue was $25.53 billion, a year-over-year increase of 35.3%, with a gross margin of 58.8% [42]. - UMC reported Q1 revenue of NT$57.86 billion, a year-over-year increase of 5.9%, with a focus on 22/28nm process technology [46]. - World Advanced's Q1 revenue was NT$11.949 billion, a year-over-year increase of 24%, achieving a net profit of NT$2.414 billion [48]. Chip Distribution - WPG Holdings reported Q1 revenue of NT$248.83 billion, a year-over-year increase of 36.8%, driven by demand from AI and related sectors [58]. - Winstek Technology's Q1 revenue was NT$247.4 billion, a year-over-year increase of 28% [60]. - Arrow Electronics reported a 6% year-over-year decline in sales, totaling $5.3 billion [64]. Domestic Semiconductor Companies - Over 70% of semiconductor companies listed in A-shares reported year-over-year revenue growth in Q1 2025, with 60.63% of companies showing profit increases [35]. - Weir Shares reported a 14.68% year-over-year revenue increase in Q1, with a net profit increase of 55.25% [38]. - Zhaoyi Innovation's Q1 revenue was 1.909 billion yuan, a year-over-year increase of 17.32% [40].

Core Viewpoint - Arrow Electronics reported adjusted earnings of $1.80 per share for Q1 2025, exceeding estimates but showing a year-over-year decline of 25.3% [1] - Revenues for the same period were $6.81 billion, a 1.6% decline year-over-year, yet surpassing estimates by 7.93% [1] Revenue Performance - Global Component sales decreased by 8% year-over-year to $4.78 billion, with a 7% decline at constant currency [2] - Region-wise, EMEA revenues fell by 16.8%, Americas by 1.7%, and Asia-Pacific by 3.1% at constant currency [2] - Global Enterprise Computing Solutions (ECS) revenues increased by 17.5% year-over-year to $2.04 billion, with a 19.4% increase at constant currency [3] - ECS revenues from America and EMEA grew by 1% and 40.1% respectively at constant currency [3] Operating Performance - Consolidated non-GAAP gross margin was 11.3%, down 120 basis points year-over-year [4] - Global Components segment gross margin was 11.6%, down 110 basis points, while Global ECS margin contracted by 150 basis points to 10.8% [4] - Non-GAAP operating income for Global Components was $173.4 million (down 28.5% year-over-year) and for Global ECS was $78.2 million (up 7.9% year-over-year) [5] - Overall non-GAAP operating income decreased by 28.7% year-over-year to $178.8 million, with a non-GAAP operating margin of 2.6% [5] Balance Sheet & Cash Flow - As of March 29, 2025, cash and cash equivalents were $231.9 million, up from $188.8 million at the end of 2024 [6] - Long-term debt decreased to $2.31 billion from $2.77 billion [6] - Cash flow from operations was $351.7 million, compared to $326.5 million in the previous quarter [6] - The company repurchased $50 million of shares during the quarter [6] Guidance - For Q2 2025, sales are projected between $6.70 billion and $7.30 billion [7] - Global Components sales are expected to be between $4.80 billion and $5.20 billion, while Global ECS sales are anticipated between $1.90 billion and $2.10 billion [7] - Interest expenses are expected to be $60 million, with non-GAAP earnings projected at $1.90-$2.10 per share [8]

Financial Performance - Consolidated sales reached $68 billion [7], a decrease of 16% year-over-year [51] - The operating margin was 26% [7] - Diluted earnings per share were $180 [7] - Operating cash flow amounted to $352 million [9] - Share repurchases totaled $50 million [9] Segment Performance - Global Components sales were $48 billion [24] - Enterprise Computing Solutions (ECS) sales were $20 billion [24] - EMEA ECS gross billings increased by 365% year-over-year [63] Q2 2025 Guidance - Consolidated sales are projected to be between $670 billion and $730 billion [44] - Global Components sales are expected to range from $480 billion to $520 billion [44] - Global ECS sales are anticipated to be between $190 billion and $210 billion [44] - Diluted earnings per share are forecasted to be $190 to $210 [44]

Financial Data and Key Metrics Changes - Consolidated sales for Q1 2025 were $6.8 billion, exceeding guidance and down 2% year-over-year, or flat on a constant currency basis [15] - Global Components sales were $4.8 billion, above guidance and down 1% sequentially, or flat in constant currency [16] - Enterprise Computing Solutions (ECS) sales were $2 billion, above guidance and up 18% year-over-year, or 19% higher in constant currency [16] - Non-GAAP gross margin for Q1 was 11.3%, down approximately 120 basis points year-over-year [17] - Non-GAAP diluted EPS for Q1 was $1.8, above the guided range [18] Business Line Data and Key Metrics Changes - Global Components business showed stronger-than-expected sales across all three regions, with notable momentum in EMEA [5][6] - ECS business delivered year-over-year growth in billings, gross profit, and operating income, with a backlog growth of over 50% year-over-year [11][12] Market Data and Key Metrics Changes - Book-to-bill ratios improved throughout the quarter and are now at or above parity in all three regions [8] - Customer inventory levels are trending towards replenishment, indicating a potential cyclical turning point in demand [9] Company Strategy and Development Direction - The company is focused on leveraging its global supply chain network to navigate trade complexities and mitigate tariff impacts [10] - Continued emphasis on value-added offerings, such as supply chain management and integration services, to enhance operating results [6] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about improving demand trends and a return to more normal seasonal patterns [9] - The company is preparing for a transitional Q2, with expectations of stronger trends in Asia and among larger OEM customers [20] Other Important Information - The company repurchased $50 million of shares in Q1, with a remaining repurchase authorization of approximately $275 million [19] - Cash flow from operations was $352 million in Q1, marking the seventh consecutive quarter of positive cash flow generation [19] Q&A Session Summary Question: Clarification on tariff impact on guidance - Management explained that the 2% to 4% increase in component sales due to tariffs is not included in the baseline guidance, as it reflects potential surcharges that may arise [24][28] Question: Customer inventory trends - Management indicated that while there are pockets of excess inventory, overall inventory levels are normalizing in line with demand signals [32][41] Question: ECS business performance and order acceleration - Management confirmed that the ECS outlook does not reflect any order acceleration, with steady growth expected in cloud and hybrid cloud technologies [47][48] Question: Visibility into future quarters - Management noted improving visibility into Q3 and Q4, driven by decreasing industry-wide inventory levels and growing backlog [56][58]

Financial Data and Key Metrics Changes - Consolidated sales for Q1 2025 were $6.8 billion, exceeding guidance and down 2% year-over-year, or flat on a constant currency basis [16] - Global Components sales were $4.8 billion, above guidance and down 1% sequentially, or flat in constant currency [16] - Enterprise Computing Solutions (ECS) sales were $2 billion, above guidance and 18% higher year-over-year, or 19% higher in constant currency [16] - Non-GAAP gross margin for Q1 was 11.3%, down approximately 120 basis points year-over-year [17] - Non-GAAP diluted EPS for Q1 was $1.8, above the guided range due to favorable sales results [18] Business Line Data and Key Metrics Changes - Global Components experienced stronger-than-expected sales across all three regions, with notable momentum in EMEA [5][6] - ECS delivered year-over-year growth in billings, gross profit, and operating income, with a backlog growth of over 50% year-over-year [12] - Global Components gross margin was 11.6%, while ECS gross margin was 10.8%, both on a non-GAAP basis [17] Market Data and Key Metrics Changes - Book-to-bill ratios improved throughout the quarter and are now at or above parity in all three regions [9] - Customer inventory levels are trending towards replenishment, indicating a potential cyclical turning point in demand [10] Company Strategy and Development Direction - The company is focused on leveraging its global supply chain network to mitigate the impacts of tariffs and improve supply chain visibility for customers [11] - The second quarter outlook reflects continued momentum in both business segments, with expectations for year-over-year growth in billings, gross profit, and operating income [13] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about modestly improving demand trends and the resilience of the company's teams during a cyclical correction [14] - The company anticipates stronger trends in Asia and across the larger OEM customer base as it moves into Q2 [10] Other Important Information - The company repurchased $50 million of shares in Q1, with a remaining repurchase authorization of approximately $275 million [19] - The impact of recent tariffs is uncertain, but the company has not factored them into its revenue guidance [20] Q&A Session Summary Question: Clarification on tariff impact on guidance - Management explained that the 2% to 4% increase in component sales due to tariffs is not included in the baseline guidance, as it reflects potential surcharges that could arise from tariffs [24][30] Question: Customer inventory trends - Management indicated that while there are pockets of excess inventory, overall inventory levels are normalizing in line with demand signals [33][41] Question: ECS business outlook - Management confirmed that the ECS outlook does not reflect any order acceleration and that growth is steady across cloud and traditional data center segments [48] Question: Visibility into future quarters - Management noted improving visibility into Q3 and Q4, driven by improved book-to-bill ratios and backlog growth [58]