Arrow Electronics posted a solid fourth quarter, with management attributing the performance to continued recovery in global components demand and the rapid adoption of higher-margin value-added services. Interim CEO Bill Austen noted, “Demand continues to gradually recover from a prolonged cyclical correction,” especially in industrial, transportation, and aerospace and defense sectors. Additionally, the Enterprise Computing Solutions (ECS) segment delivered record gross and operating profit, supported by ongoing growth in cloud and AI-related infrastructure. Management specifically highlighted the intentional shift toward value-added offerings as a key driver of improved margins and cash generation.
Is now the time to buy ARW? Find out in our full research report (it’s free for active Edge members).
Arrow Electronics (ARW) Q4 CY2025 Highlights:
- Revenue: $8.75 billion vs analyst estimates of $8.21 billion (20.1% year-on-year growth, 6.6% beat)
- Adjusted EPS: $4.39 vs analyst estimates of $3.57 (23.1% beat)
- Adjusted EBITDA: $370.4 million vs analyst estimates of $336.2 million (4.2% margin, 10.2% beat)
- Revenue Guidance for Q1 CY2026 is $8.25 billion at the midpoint, above analyst estimates of $7.55 billion
- Adjusted EPS guidance for Q1 CY2026 is $2.80 at the midpoint, above analyst estimates of $2.33
- Operating Margin: 3.4%, in line with the same quarter last year
- Market Capitalization: $8.06 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Arrow Electronics’s Q4 Earnings Call
- Will Stein (Truist Securities) asked about billing and booking patterns during the quarter. CFO Raj Agrawal confirmed results were above normal seasonality across all regions, with no significant pull-forward or unusual trends.
- Ruplu Bhattacharya (Bank of America) questioned sustainability of sales growth in both global components and ECS segments. Agrawal and President Rick Marano pointed to steady improvement in backlog and gradual recovery in key verticals, emphasizing a broad-based upturn.
- Bhattacharya (Bank of America) also asked about the composition of ECS hardware growth and value-added services adoption. ECS President Eric Nowak identified networking and security as hardware growth drivers, while Marano described value-added services as extending across multiple markets and customer types.
- Melissa Fairbanks (Raymond James) inquired about working capital investment and its impact on interest expense. Agrawal explained lower-than-expected interest costs stemmed from improved cash flow timing and lower short-term rates, but anticipated higher working capital needs in future growth periods.
- Fairbanks (Raymond James) sought clarity on recovery visibility and seasonality in Western markets. CEO Austen acknowledged improving backlogs, but said visibility remains limited beyond 90 days, with Q1 expected to be above seasonal norms in all regions.
Catalysts in Upcoming Quarters
Over the coming quarters, the StockStory team will watch (1) the pace of growth in value-added service offerings and their impact on Arrow’s margin profile, (2) the expansion of recurring revenue through digital platforms like ArrowSphere and as-a-service models, and (3) signs of sustained demand recovery in core markets such as industrial, transportation, and aerospace. Execution on operational efficiency and leadership transitions will also be important milestones.
Arrow Electronics currently trades at $157.78, up from $141.10 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free).
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