Arrow Electronics: Better Demand, Same Margin Questions
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Emmanuel Onwusah370 FollowersFollow5ShareSavePlay(7min)CommentsSummaryArrow Electronics shows solid topline growth, but margin compression and leadership uncertainty limit conviction for a rerating.Gross margin declined 70 bps YoY, with a $21M ECS contract charge highlighting execution risks and credibility concerns.ARW trades at low multiples (11x forward P/E), reflecting market skepticism about near-term margin expansion and ECS scaling.I maintain a Hold, awaiting improved margin execution, permanent leadership, and Q4 results to confirm recovery trajectory. alengo/E+ via Getty Images Arrow Electronics, Inc. (ARW) is still recovering slowly, but I don’t think the story is complete. Yes, its earnings beat in Q3 2025 was very encouraging; it made even more money across Global Components and Enterprise Computing Solutions (itsThis article was written byEmmanuel Onwusah370 FollowersFollowI’m Emmanuel Onwusah—a financial analyst, writer, and recovering engineer. I hold FMVA® and BIDA® certifications from the Corporate Finance Institute, and I spend most of my time creating pitch decks, building models, analyzing companies, and trying to make sense of where value meets narrative. My background is in petroleum and gas engineering, but I moved into finance because I’ve always been drawn to how businesses grow, how markets react, and how data tells stories. I focus on tech, infrastructure, and internet services, with a bias for companies that pair strong fundamentals with real potential.I write here to think in public, share investment ideas, and connect with other investors who care about long-term returns, not just short-term noise. If you enjoy thoughtful breakdowns and real conversation around stocks, you’re in the right place. There’ll be charts, jokes, and hopefully, some profitable ideas.Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.Quick InsightsWhat are the key obstacles preventing ARW's stock rerating despite revenue growth?Margin compression, a $21M ECS contract charge, and ongoing leadership uncertainty undermine confidence in sustainable earnings improvement and limit valuation upside.How critical is Q4 guidance for ARW's investment case?Q4 results are pivotal; hitting $8.1B revenue and $3.18 EPS midpoint would signal margin recovery and reinforce the recovery narrative, potentially supporting a rerating.What must ECS achieve to become a stronger earnings driver for ARW?ECS needs to avoid further contract underperformance and deliver consistent margin improvement to offset Components volatility and support consolidated margin expansion.Recommended For You